7 things to consider when choosing a credit card for large purchases

16.08.2024 - 20:14 / thepointsguy.com

One of the first lessons I learned when I got into the points and miles hobby is to put everything possible on a travel rewards credit card. However, it's also important to choose the best card to make sure that you get the biggest bang for your buck. This is especially true when it comes to making a large purchase. So, today I want to discuss nine things to consider next time you plan on swiping your credit card for a significant amount of money.

For starters, let's agree that the definition of a "large" purchase can vary significantly from person to person. You may not be able to charge a new car purchase to a credit card, but spending $1,000 or more on a medical bill, new laptop computer or an essential household item may be much more common. So, what card should you use?

Here's what to know.

One possible option is to use a charge card instead of a credit card for large purchases. The biggest benefit to using a charge card is that charge cards have no preset spending limit. Instead, each purchase is approved on a case-by-case basis based on your history. The downside to using a charge card is that you must pay off your balance in full each month. (Then again, you should always be doing this, as I wrote about in my 10 commandments for travel-rewards credit cards post.)

As a reminder, one of the largest parts of your credit score is your utilization rate; in other words, how much of your available credit you're using. Since charge cards don't have preset limits, they aren't included in this calculation. As a result, charging a $5,000 purchase to a charge card won't have nearly the same impact on your credit score as charging that same purchase to a card with an $8,000 credit limit. However, your statement balance is still reported to the credit bureaus, so creditors looking at your credit report will still see the high balance.

Related: Business credit cards vs. charge cards — which is right for you?

Where you make your purchase matters, as cards have bonus categories that include particular types of merchants. There are plenty of cards that offer valuable earnings rates on different categories, meaning you can earn additional rewards when spending in those categories.

If you're making a large purchase at a home-improvement store, for instance, you'll want to put it on your Citi Custom Cash® Card (see rates and fees), since you'll earn 5% cash back in your top spending category (up to $500 spent each billing cycle).

Some purchases, however, such as medical bills, likely won't fit into any bonus categories. For these types of expenses, you may want to use a card that's good for everyday spending, like the Citi Double Cash® Card (see rates and fees)

One often overlooked aspect of maximizing earning