Big purchases on your credit card – are they worth the effort?

Posted October 15, 2017 by CCC Staff in

Have you ever considered making a major purchase on your credit card? You’re not alone. Purchasing a good or service on your credit card offer many benefits – cash flow management, consumer protection and of course, rewards.

In some industries like the travel industry, using a credit card to make your purchase is standard (you’ll have a tough time booking a flight without a credit card). But in other industries like home renovations and automobiles, you’ll have a tougher time.

While many of us would like to use our credit card to make purchases (who doesn’t like earning rewards on a hefty purchase), it isn’t always possible – unless you get a little creative. A man in Virginia recently got a little creative by purchasing a $45,000 car on his credit card. His goal was to earn enough rewards points to use towards a “free” vacation.

How did he do it?

Now I know what you’re wondering – how the heck did he pay for a car on his credit card? Last time we checked, credit cards don’t typically come with hefty credit limits and car dealerships don’t usually let you purchase vehicles with credit cards. Full disclosure: this guy is a bit of a credit card rewards expert. He managed to pay for his honeymoon to Aruba and two family trips to Disney World, all with reward points. However, this was his first time buying a car on his credit card. (His biggest purchase to date on his credit card was a fridge.)

Buying a car on his credit card required a lot of legwork. First, the man had to phone around to find a dealership that would actually let him purchase a vehicle with a credit card. After calling five dealerships, he found one that would let him use his credit card and not charge any additional fees. The first hurdle was out of the way, so he called his bank to get his credit limit increased to accommodate the large purchase. Luckily for them, they increased his credit limit.

The story got a little more complicated when he didn’t have enough cash on hand to pay off his credit card balance and had to do several balance transfers, but the bottom line is that he was able to purchase a car with his credit card and earn some handsome rewards.

Was it worth it?

At first glance, it seems like the man made a smart move. He purchased a car and earned a boatload of rewards – enough to go on a family vacation. Who wouldn’t want to do that? But is the average person really willing to go through as much trouble as this man did? 1 percent or 2 percent on a $45,000 purchase is only $450 or $900 in rewards. Perhaps his time could have been spent better elsewhere.

Also, although the car dealership didn’t charge him an extra fee for using his credit card, he probably didn’t get as good of a deal as he could have. He may have been able to negotiate down the price further if he didn’t use his credit card, perhaps making this a case of penny wise, pound foolish. He earned the reward points, but at what cost?

There’s also the issue of his credit score. He increased his credit limit big time to accommodate the hefty purchase. While his credit card was willing to bump up his credit limit, the man might run into trouble qualifying for a mortgage with such a large credit limit (not to mention the large outstanding balance on his credit card). That’s because his credit utilization would be so high.

The Bottom Line

This is certainly an interesting story. It’s nice to hear that buying a car on your credit card is possible, but it’s probably not practical for the average Joe. While it certainly makes sense to buy appliances like fridges and stoves on your credit card, you’re probably better off buying a car in cash (if you can afford it) or with a car loan. While you’re giving up the rewards, if you negotiate you can probably drive away with a better deal on the car and use the savings to pay for your vacation instead.