How to make large purchases using a credit card
When it comes to big-ticket items, here’s how a credit card could work for you.
We’re committed to our readers and editorial independence. We don’t compare all products in the market and may receive compensation when we refer you to our partners, but this does not influence our opinions or reviews. Learn more about Finder .
If you’re looking to furnish your home, take the family on holiday or buy new wheels, you’re probably also thinking about how to finance it – especially if you don’t have cash or savings to put towards your purchase. While options such as in-store financing and personal lines-of-credit may be available, using a credit card to make your purchase could also be tempting.
For instance, you might want to take advantage of a 0% purchase credit card offer to help save on interest charges, or use a rewards credit card to earn points that lead to future rewards. But, if unchecked, you could end up paying a lot of money in rates and fees. Here, we look at the pros and cons of using a credit card for making large purchases so that you can decide if plastic is the right way to go.
Why would I make large purchases using a credit card?
The potential benefits and features of using a credit card for life’s large items include:
- 0% purchase rates. These credit cards let you enjoy 0% interest on your purchases for an introductory period, usually between 6 and 24 months. This can translate into sizeable interest savings depending on the cost of your purchases.
- Rewards. Rewards credit cards let you earn points per $1 spent that can be redeemed for a variety of rewards including flights, hotels, car rentals, shopping vouchers, fashion, household, lifestyle goods and services, and more.
- Interest-free days. Similar in principle to 0% purchase credit cards, the standard interest-free days on your credit card (typically 55 days) gives you time to pay for your purchases without incurring interest charges. Be aware that most credit cards require you to fully pay your account balance by the statement due date to enjoy interest-free days.
- Flexible repayments. Compared to in-store financing, which usually involves fixed payments of the same amount each month, a credit card lets you make flexible repayments as often as you wish. As long as you pay at least the minimum amount that's listed on each statement, you can vary how much money you put towards the balance without penalty. You can even make additional payments to repay your debt more quickly.
- Complimentary purchase insurance. This will vary, but many credit cards these days come with complimentary insurance perks that mean your large purchases would enjoy free purchase protection insurance, extended warranty coverage and best price guarantees.
- Making use of an existing credit account. Paying with an existing card saves you the hassle of credit checks and possible waiting times that could come from applying for new credit through in-store financing.
- Extended interest-free periods. A select number of credit cards – including the Gem Visa, GO MasterCard and HSBC credit cards – allow you to take advantage of exclusive in-store financing options that allow you to pay off purchases with no interest for up to 60 months.
What to watch out for when making large purchases with a credit card
These are some of the potential issues you might face when using a credit card for large purchases:
- Going over your credit limit. If you already carry a balance on your card, it’s possible you could exceed your credit limit when you make a large purchase (or purchases). If you’re not careful, you could find your card declined or incur overlimit fees.
- Interest charges. Being aware of when your 0% interest promotional period ends, and understanding how interest-free days are calculated, can help ensure that you don’t inadvertently incur interest charges.
- Only making minimum payments. If you just pay the minimum required amount on your card statement each month, your debt can stretch for years and cost you more in interest fees than the original principal amount. Learn how much you should repay each month.
- Other credit card costs. If you’re applying for a new card specifically for making large purchases, consider other fees including the card’s annual fee.
Compare 0% purchase credit card offers
Tips for using a credit card to make large purchases
Having read and understood the pros and cons listed above, it’s important to carefully consider how and when you’ll be using your credit card for large purchases, as well as how soon you can repay the full amount. If you do decide to pay with plastic, here are some tips to help ensure that it stays affordable and convenient:
- Check eligibility requirements for interest-free offers. Whether it’s 0% interest on purchases during the introductory period, interest-free days or an exclusive in-store financing option, research the card’s eligibility requirements and ensure that you meet all the criteria for enjoying your interest-free offer.
- Budget for repayments. This is crucial to help you stay on track when it comes to repayments. With a good repayment plan, some discipline and consistency, a budget for clearing your full balance within the interest-free period can ensure that you stay out of debt.
- Pay more than the minimum each month. Don’t make the mistake of making only minimum repayments. Keep your interest costs low in the long run by repaying as much as you can as early as you can.
- Consider split payments. To further reduce interest charges, you can also pay for a portion of your purchase by cash or debit card, and put the rest on credit.
- Consider a balance transfer. If you’ve already paid for your large purchase with a credit card that charges interest, or if you already carry existing credit card debt, consider a 0% balance transfer card to help you save on interest fees and repay your debt sooner.
While credit cards can be a convenient and beneficial mode of payment, it’s important to weigh up the pros and cons of using them on your larger purchases since these may naturally take longer to repay. If you decide to go with one, make sure you research all available offers before deciding on the best card deal for your needs.
Picture: ShutterstockBack to top
More guides on Finder
Free data breach policy templates (Australia)
Write a data breach policy that details an effective response plan.
Financial Fitness Challenge Week 3: How to get the most out of a credit card
How to cut debt and make your credit card work for you.
Rejected out of hand: 1.5 million Aussies knocked back for a credit card
The fear of getting rejected for a credit card is real, according to Finder, Australia’s most visited comparison site.
Bank Australia Commercial Visa credit card
Designed to help you track business spending, this Bank Australia credit card offers cards for employees and interest-free days on purchases.
Financial Fitness Challenge Week 2: Check and improve your credit score
Understand your credit score with the Finder Financial Fitness Challenge.
Brighte Personal Loan
Looking to renovate your home? Find out more about Brighte's personal loan for home improvements and ways in which it may be able to benefit you.
Credit card woes: Where do Aussies turn if they can’t pay off their plastic?
Only half of Australians who find themselves buried under out-of-control credit card debt could dig themselves out, according to Finder.
UBank has dropped its savings account rate, how does it compare now?
UBank has cut the interest rate on its popular USave savings account down to 1.46% p.a. Here are a few accounts still offering a higher bonus rate.
Planning your retirement? Here are 4 things you need to know about reverse mortgages
SPONSORED: A reverse mortgage could let you use some of your home equity to fund your retirement costs. Here's what you need to know.
Over the limit: Pandemic pushes 2 million Aussies beyond credit means
Soaring unemployment and wage cuts have seen people increasingly overdrawing their credit cards, according to Finder, Australia’s most visited comparison site.
Ask an Expert
Credit Cards Comparison
* The credit card offers compared on this page are chosen from a range of credit cards finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.