Having access to funds is crucial for real estate investors. That's where credit cards come in, as they provide a ready source of credit that can be used to finance various aspects of real estate projects. However, not all credit cards are created equal, and not all credit cards are suitable for real estate investors.
How credit cards benefit real estate investors
There are several reasons a credit card is worth having when investing in real estate:
- More spending power: With real estate investing, bills add up quickly. Unless you have deep cash reserves, it can be hard to manage paying for everything from your bank account. A credit card is a convenient way to make purchases on credit and pay it back when the bill's due.
- Potentially less interest: Many of the best credit cards come with intro 0% APR periods for new purchases. During this period, you won't incur interest on your balances. This could make using a credit card cheaper than other options, like personal loans.
- Building your credit: Paying your credit card bills on time and keeping your credit utilization low can improve your credit. This is a crucial step if you're trying to reach a sufficient credit score for an investment property.
- Earning rewards: A rewards credit card is an easy way to save on the money you're spending anyway. For example, if a card offers 2% cash back, it's like getting a 2% discount on your spending. Over time, these rewards add up to significant savings.
- Track business expenses: Getting a credit card solely for your real estate business helps you track your business expenses and make the right tax deductions. Many business owners use a business credit card for this reason.
- Renovations: Home improvement credit cards allow investors to make necessary repairs and renovations to their properties while earning rewards and staying within their budgets. Plus, many home improvement credit cards offer extended financing and low interest rates, giving investors more flexibility when it comes to paying off their projects.
What real estate investors should look for in a credit card
In a nutshell, the most important factors to look for in a credit card are the following:
- Purchase rewards
- Intro 0% interest offers
- A high credit limit
- A reasonable annual fee
- Bonus opportunities
- Purchase protections
Now, let's go over in more detail how each of these factors works and why they matter.
Purchase rewards
Real estate investing involves a lot of spending. Whether you're making purchases at home improvement stores or traveling back and forth between your properties, having the right credit card to earn rewards or cash back can turn this spending into valuable savings. While you can't pay your mortgage with a credit card, everything else is fair game.
0% intro APR offers
A credit card may offer a 0% APR on purchases, balance transfers, or both for a set period of time. This offer is helpful when you know you won't be able to pay your credit card bill in full. For example, if you have a costly remodel on a rental property and need to pay it off over time, a 0% purchase APR lets you do that without interest.
A high credit limit
The credit limit is the maximum amount you can spend using your credit card. Since real estate investing can be expensive, a card with a high credit limit can give you ample financing to get the job done.
A reasonable annual fee
Some credit cards charge an annual fee, but you can also find plenty of cards without annual fees. If you decide to get a card with an annual fee, make sure the benefits are worth more than what you're paying for the card.
Welcome bonus
Welcome bonuses are dished out to new cardholders, usually after they hit a spending threshold in a specific timeframe. For example, a card could offer $500 in cash rewards if you spend $1,000 in the first three months. Bonuses like these can help you amass points, miles, or cash back in a short period.
Purchase and travel insurance
Many credit cards come with free shopping and travel insurance. For example, some cards have purchase security, which covers new eligible purchases against damage or theft for 90 days. Others come with extended warranties, which can double the original manufacturer's warranty. These protections are invaluable to a real estate investor, helping you limit your business losses.
Do real estate investors need a business credit card?
You don't need a business credit card for real estate investing, but there are advantages to getting one. For example, a business credit card can help you separate your personal and business expenses. Some even have expense-tracking reports, while others will let you request additional cards for your employees.
Best for 0% intro APR on purchases and balance transfers and unlimited Cashback Match: Discover it® Cash Back
The Discover it® Cash Back comes with a 0% intro APR period of 15 months on balance transfers and new purchases. It also comes with one of the most lucrative welcome bonuses you'll find: Discover will match all the cash back you’ve earned at the end of your first year. So you could flip $500 earned cash back into $1,000.
The card also earns a 5% Cashback Bonus®, up to a quarterly maximum spend of $1,500, on everyday purchases in rotating, quarterly categories like grocery stores, restaurants, and gas stations. Quarterly activation is required. If you maxed out these categories, you would net $300 in cash back rewards -- or $600 with the Discover Cashback Match.
Best for a welcome bonus: Ink Business Preferred® Credit Card
The Ink Business Preferred® Credit Card offers a welcome bonus of 90,000 points for spending $8,000 on purchases in the first 3 months. Those Chase Ultimate Rewards points are worth roughly $1,250 when redeemed for travel through the Chase Travel portal. You can also transfer them to Chase's airline and hotel partners or redeem them for $1,000 in cash back. It's an extremely valuable bonus, especially for a card with a reasonable annual fee.
You can earn even more extra points through this business credit card's bonus categories. The card offers 3X points per $1 on the first $150,000 in combined purchases each year across the following categories:
- Travel
- Shipping
- Internet, cable, and phone services
- Advertising purchases through search engines and social media
Best for 0% intro APR and unlimited cash back: Wells Fargo Active Cash® Card
If you want to earn competitive cash rewards on your purchases, the Wells Fargo Active Cash® Card is the best choice. It offers an unlimited 2% cash rewards -- the highest, no hassles flat rate we've come across. In addition, new cardholders who spend $500 in the first 3 months will earn a $200 cash rewards welcome offer.
This card has no annual fee. It also includes a 0% introductory APR for the first 12 months from account opening on new purchases and balance transfers made within 120 days of account opening (after which the go-to rate of 19.24%, 24.24%, or 29.24% Variable APR applies). This gives you time to pay off large business expenses or refinance credit card debt before incurring interest.
Best for long balance transfer and no late fees: Citi Simplicity® Card
With the Citi Simplicity® Card, you get one of the longest 0% intro APR periods for balance transfers of credit cards we've come across. The 0% intro APR lasts for the first 21 months on Balance Transfers for balance transfers and 12 months on Purchases for purchases.
Investing in real estate often involves paying large upfront costs and then paying them off over time. If you need to do that, this card can save you quite a bit of money. You'll be able to avoid interest charges for a full year and a half. You also won't need to pay anything extra to carry the Citi Simplicity® Card, as it doesn't charge an annual fee.
This content is not provided by the issuer. Any opinions expressed are those of Motley Fool Money alone, and have not been reviewed, approved or otherwise endorsed by the issuer.
Best for home improvement spending: MyLowe’s Rewards Credit Card
When your business involves fixing up an investment property or flipping houses, there are usually plenty of trips to home improvement stores for supplies. That's where the MyLowe’s Rewards Credit Card comes in handy. It's a great value for the store's frequent shoppers.
The MyLowe’s Rewards Credit Card offers a 5% discount on all your eligible purchases, including both in stores and online. On certain types of purchases, it offers special financing plans with interest rates as low as 0%. When a special financing plan is available, you can choose between getting a 5% discount or taking advantage of the financing offer.
There's no annual fee for the MyLowe’s Rewards Credit Card. The card issuer is also flexible about who it approves, so you don't need a good credit score for this card.
Best for home improvement financing plans and return policy: Home Depot® Credit Card
The Home Depot® Credit Card comes with six months of financing on purchases of $299 or more and up to 24 months financing during special promotions. Plus, as a cardmember, you'll have one whole year to make returns, four times longer than if you weren't a cardholder.
Keep in mind that this card offers deferred interest, which isn't the same as a zero-interest period. With deferred interest, your credit card company tallies your interest quietly without charging it to your account. If you don't pay off purchases before the deferred interest period ends, you'll be responsible for paying all the interest you accrued from the day you made the purchase.
With a true 0% intro APR period, you don't accrue interest at all. So while this card can be useful if you know you're going to pay off those $299-plus purchases within six months, it can be expensive if you don't.
Best for flexible rewards: American Express Business Gold Card
The American Express Business Gold Card has no preset spending limit. Instead, the flexible spending limit adapts according to factors such as your purchase, payment, and credit history.
It also offers bonus rewards to match your spending habits. Every billing cycle, this American Express card earns 4X points per $1 in the two bonus categories on its list where you spend the most ($150,000 annual spending cap, terms apply). That list includes airfare purchases directly from airlines, as well as U.S. purchases in the following categories:
- Online, TV, and radio advertising
- Computer hardware, software, and cloud systems from select technology providers
- Gas stations
- Restaurants
- Shipping
- Terms apply; enrollment may be required
You earn bonus rewards on up to $150,000 in bonus spending per calendar year. All other eligible purchases earn 1X point per $1. Terms apply. This business credit card has an annual fee of $375 (see rates and fees), but the rewards and the card's other perks can make up for that if you have high spending.
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