Financing Big Purchases With Credit Cards Makes Sense in This Situation

Financing purchases using a credit card often doesn't make sense. If you can't afford to pay off your credit card balance in full right away, you could end up paying a fortune in interest and draining your checking account. In fact, as of July 10, 2023, the average credit card interest rate was a whopping 20.68%.

But, there's one exception to this general rule. In this one particular situation, a credit card may just be the best option to pay for something over time that you can't afford to cover all at once.

Here's when using a credit card to finance a purchase makes sense

Using a credit card to finance a purchase can make sense, despite the high interest rate most cards charge, if you won't actually have to pay that interest rate.

That can happen if you are able to qualify for a credit card with a special promotional offer. Many cards try to entice people to sign up and become cardmembers by offering a 0% introductory rate. For example, you might be able to pay no interest on purchases made within the first 12 months of signing up or even within the first 15 months or the first 20 months.

If you can borrow for a whole year (or longer) without incurring a single dollar in interest, that's a great option for financing a large purchase. There's no other solution that allows you to borrow without paying anything for the privilege.

Be sure you have a plan to pay off the card before the 0% rate expires

Although it can make a lot of sense to take advantage of a 0% credit card offer when you want to pay for something over time, you need to be absolutely sure you're going to wipe out your balance before your card starts charging the standard (high) interest rate.

Your card is likely to have a pretty low minimum payment. If you only pay the minimums, you'd hardly reduce your balance at all. By the time the introductory rate ended, you could still owe hundreds or even thousands of dollars on your card depending how much you initially charged. And you'd likely now be stuck paying very high financing charges on your outstanding balance.

To make sure that doesn't happen, figure out exactly how much to pay during your 0% APR period to pay your card off in full. This shouldn't be too hard since you don't have interest costs to contend with. Just divide the amount borrowed by the length of time you have to pay off your balance before rates jump up.

For example, if you're charging a $2,500 purchase and you have 15 months to pay it back at 0%, you'd divide $2,500 by 15 to find out you need to pay about $166.67 per month. If you're confident you can do that, then using the 0% APR card is probably a smart financing option.

Just be sure to follow through with your commitment to pay -- and, ideally, set up automatic payments so the money goes to your card automatically. That way, you won't have to worry about getting stuck with interest on a big balance when that high rate returns.