The Best Credit Cards For Large Purchases (& Is it Better Than Getting a Large Loan?)

The Best Credit Cards For Large Purchases (& Is it Better Than Getting a Large Loan?)

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The best credit cards for large purchases are likely to either be cashback credit cards or those with introductory 0%-on-purchases deals.

It depends on your financial circumstances and how quickly you’ll be able to repay the debt.

Below, you’ll learn how each of these credit card types works and how to find the best card to fund a large purchase.

How a 0%-on-purchases credit card works

With 0%-on-purchases cards, you may be able to borrow several thousands of pounds for well over a year without paying any interest.

Most of the world’s major credit card providers are offering cards with these introductory offers. These cards are putting an end to the often-touted advice that borrowing money to fund a large purchase is bad.

After all, if you repay your bill in full before your introductory period comes to an end, there will be no interest charges to pay. Many of these cards don’t charge an annual account management fee ether.

In this case, using a credit card to fund a large purchase would be better than paying for it up-front, as the money you would have spent can remain in a savings account earning interest.

This scenario assumes that you’re responsible with your credit card repayments. If you don’t pay off your balance in full before the 0% period ends, the APR will shoot up, and you’ll be left with a hefty interest bill.

Best Credit Cards For Large Purchases

Once your credit card application is accepted, your 0%-interest period, credit limit, and APR will be confirmed. If you have a shaky financial history and are deemed to be a risky applicant, you may be offered worse terms than originally advertised. The 0% period is likely to be between three months and 18 months, depending on your choice of card. You’ll typically need to have a good credit score to be approved for the cards with the best 0%-on-purchases deals.

Assuming you accept the terms offered to you, the lender will deliver the card to your home address. This process typically takes around seven working days. Usually, you’ll have to contact your credit card provider to ‘activate’ your card once it has arrived to use it.  Your 0%-period begins on the day that the card is activated.

During this time, you’ll be charged no interest on any payments made with the credit card. You’ll still pay interest on balance transfers (unless your card also has a 0% deal on these too) and cash advances.

You’ll still have to make the minimum monthly repayment on this card, although it’s recommended to make more.

Your credit card provider will usually send you a reminder of the date your 0% period ends. On this day and in the future months, you’ll be charged interest on your remaining balance.

So, if you spend $2,000 on the first day of card ownership and only pay back $1,800 before the 0% period ends, you’ll pay interest on the remaining $200.

You can continue to use the card as normal after the 0% period ends, but you’ll pay monthly interest on unpaid balances.

How a cashback credit card works

how does cashback credit card work

With a cashback credit card, you’ll receive a percentage of your purchases transferred back onto your card as additional credit.

In a similar mould, there are also ‘reward credit cards’ which let you earn rewards points, which can be exchanged for discount vouchers, instead of cashback.

The cashback rate will be clearly advertised as a percentage. Many cards offer different rates for various categories of spending (for example, travel, groceries, petrol), plus a base rate for ‘all other purchases.’

You earn cash back automatically by using your credit card to purchase items or services. It may be transferred onto your card monthly, quarterly or annually, depending on the card. There may be a cap on how much cash back you can earn in a specific amount of time. For tax purposes, cashback is considered a discount, so you don’t need to declare it.

You will have to pay interest on any balances that aren’t cleared at the end of the month. These interest charges will outweigh any cashback earned.

As a general rule, cashback credit cards are only really a useful option if you’re not planning to borrow money.

However, there are some cards that have BOTH cashback and 0%-on-purchases deals.

In this case, it’s still important to ensure your balance is cleared before the 0% period ends.

Do not fall into the trap of overspending during the 0% period to maximize cashback, only to have a balance remaining when it ends and erase all your earnings via interest charges.

What to look for when looking for great credit cards for large purchases

Here are the most important features to compare when looking for the best credit cards for large purchases.

  • The length of the 0% deal. The longer the length of your 0% deal, the less you’ll have to repay each month in order to clear your balance without paying interest fully. Unlike balance-transfer credit cards where the cards with longer 0% deals tend to carry a larger fee, there is no downside to having a longer 0%-on-purchases deal. However, these lengthier deals are harder to be approved for.
  • Cashback or rewards. These can essentially act as a discount on your large purchase. However, (as discussed above) this only really applies if you’re not planning to borrow any money.
  • Credit limit. You’ll want a credit card provider that lets you borrow enough to make your desired purchases.
  • Customer service. There are several customer polls conducted by third-party companies to help you find the credit card providers with the best customer service.
  • Other features. A lot of these credit cards will also offer 0%-interest periods on balance transfers. Some may offer the opportunity to earn cash back or rewards. If you’re worried about paying off your balance before the 0% period ends, it’s worth making a note of the APR.

BankAmericard credit card

Best credit cards for large purchases

The BankAmericard credit card will offer you 0% interest on purchases for 18 months. You’ll also pay 0% interest on balance transfers for 18 months. You’ll be offered an APR between 15.24% and 25.24%. There is no annual fee.

The Wells Fargo Platinum Card also offers 0% interest on purchases for 18 months. You’ll also pay 0% interest on balance transfers for 18 months. You’ll be offered an APR between 17.74% and 27.24%. There is no annual fee.

The HSBC Gold Mastercard offers 0% interest on purchases and balance transfers for 18 months. You’ll be offered an APR of 13.24%, 17.74%, and 21.24%. There is no annual fee, and you’ll pay no loading fees on foreign transactions. If you make a late payment, your late fee will be waivered on the first offense. HSBC credit cardholders get access to various perks, including rental car insurance, discounted airport concierge services, and Mastercard’s ‘Priceless Cities’ events scheme.

The Chase Freedom Unlimited credit card will offer you 0% interest on purchases for 15 months. You’ll also get 0% interest on balance transfers for 15 months. You’ll earn 3% cashback on all purchases in the first year capped at $20,000 of spending. After that, you’ll earn 1.5% cashback on all purchases with no cap. You’ll be offered an APR between 17.24% and 25.99%. There is no annual fee.

The Capital One Quicksilver Cash Rewards credit card offers you 0% interest on purchases for 15 months. You’ll get 0% interest on balance transfers for 15 months too. Also, you’ll get an introductory bonus of $150 cash back if you spend $500 in the first three months of card ownership. You’ll get 5% cashback on spending in certain categories and 1.5% cashback on all other spendings with no cap. The APR offered to you will be between 16.24% and 26.24%.

How to use your credit card for large purchases responsibly

The best way to guarantee that you pay off your credit card before your 0% deal ends is to set up a standing order from your current account.

You’ll need to divide your balance by the number of months on your 0% deal. So, if you’ve bought a $2,400 sofa using a credit card with a 12-month 0%-on-purchases deal, you’d set up a standing order for $200 a month. Provided you don’t spend any more on this credit card, and you’ll pay off your balance exactly in time using this formula. If you do continue to spend money on this card, you’ll need to pay back extra during this month or adjust your standing order accordingly.

It’s recommended not to spend more than you can afford to repay. This is a trap that people with cashback credit cards fall intoтт because they wanted to claim as much cashback as possible. This is far from cost-effective because the interest charges at the end of the 0% period will quickly cancel out any cash back you’ve earned if you fail to clear your balance.

It’s also highly recommended not to complete transactions that you will pay interest on (such as balance transfers or cash advances).

Credit Cards vs Personal Loans

How do credit cards compare to personal loans?

Personal loans are the most common alternative to credit cards when borrowing money for large purchases.

The maximum amount you’ll be offered to borrow tends to be larger than with personal loans.

However, the size of your repayments will be fixed, and you will make fixed interest payments on this debt, albeit with a lower rate than the average credit card APR.

What’s more, credit cards offer ‘revolving credit,’ meaning you can spend up to your credit limit and re-spend what you’ve paid back. With a personal loan, you get a lump sum which you can’t get back once it’s repaid.

0% credit card

  • Smaller maximum credit limit;
  • 0% APR for a limited period, meaning you can avoid interest;
  • Higher APR, once the 0% interest ends;
  • Revolving credit.

Personal loan 

  • Larger maximum credit limit;
  • Fixed interest payments each month;
  • Lower APR;
  • Borrowing a lump sum.

Frequently asked questions about credit cards and large purchase

How do I apply for a credit card?

Most credit card providers will allow you to apply for a credit card online. Others may make it possible to apply over the phone or in-branch if it has branches in the United States. During the application, you’ll need to provide personal information, proof of identity, and various financial details.

You’ll also go through a credit check. It could sometimes take a couple of days to assess your application and confirm the length of the 0% deal, APR and credit limit associated with your card.

How do I know if I’m eligible for a credit card?

You’ll need to be at least 18 years old to apply for a credit card. There is likely to be minimum income and credit score requirements. A lot of credit card providers publish minimum eligibility criteria on their websites. Many also offer online eligibility checker tools, which will give you a strong idea whether you’re likely to be approved for a credit card.

These tools require a few personal and financial details and will perform a ‘soft check’ of your credit report before it gives its verdict. Still, using this tool will have no impact on your credit score. You can save time and protect your credit score by using this tool before making a full application.

How many credit cards can I own?

There are no official limits on how many credit cards an individual is allowed to own.

However, when assessing your creditworthiness, lenders will always consider how much access to credit you already have. If you already own multiple credit cards or access to other forms of credit, this will count against you in future credit assessments.

How do credit card providers decide my credit limit?

Credit card providers will assess your financial history, including your income, outgoings, and credit score, then offer you a credit limit based on what it believes you can afford to repay. You can apply to have your credit limit increased, at which point the bank will reassess your finances and make a decision on whether this is a safe move.

What is stoozing?

Stoozing is the act of transferring credit from a 0%-on-purchases card into an interest-paying account.

This could potentially be achieved by transferring the balance directly, although not all credit cards allow this and the transfer fee tends to drown out most of the interest you’d earn.

You could get around this by making all your everyday purchases on a 0% credit card and putting the money you would have spent on these items into a savings account.

The key to successfully stoozing is to transfer the money back onto your credit card before your 0% period runs out.

Conclusion

The United States has a huge problem with credit card debt, which is why there are so many warnings about paying for things you can’t yet afford with plastic.

Yet, if you use a 0%-on-purchases credit card responsibly, you could purchase anything that you could reasonably expect to afford in up to 18 months’ time at no extra cost to you!

You could get tomorrow’s dream delivered to you today. These credit cards also mean there’s no need to panic if an unexpected bill drops through the letterbox. These could also be paid in up to 18 monthly installments at no cost to you.

What’s more, with a cashback credit card deal, you could have a percentage of your purchase returned to you.

Sure, there are some risks.

There’s no guarantee you’ll be approved for a credit card with a deal long enough for your needs.

Also, there’s every chance that another bill comes in while you’re paying off your credit card, requiring you to borrow more and ruining your strategy to pay off your debt without interest.

Nevertheless, it’s difficult to deny that these types of credit cards aren’t a fantastic financial tool to help you achieve your personal goals a lot quicker.

Joe Elvin

Joe Elvin is an online writer who has specialized in personal finance since 2011, who has previously written useful advice guides for the likes of Finder and Which? Money. He's currently enjoying the digital nomad lifestyle, so you're most likely to find sipping coffee at some cafe in South East Asia.