5 questions to ask before making a big purchase for rewards

Cashing In columnist Tony Mecia
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com

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Question Dear Cashing In,
I’m getting ready to have a swimming pool built. I was going to initially make required installment payments in cash, but I thought it would be a good idea to use my Citi Costco Anywhere Visa instead so I can earn rewards. Each installment is over $10,000. Am I able to use the card as long as I have sufficient available credit? Is there a limit on rewards? Thank you in advance. – Mickey

Answer Dear Mickey
Big purchases can mean a big boost to your credit card rewards, but they also can be a little trickier than smaller, more routine purchases.

Every time you are preparing to make a big purchase – whether it is fixing up your house, buying a car, planning a wedding – it makes sense to learn the answers to these five questions: 

1. Do they take credit cards?
When it comes to big purchases, many vendors prefer cash. That’s because they don’t have to pay fees to accept your credit card. If your big purchase is from a retail store that typically takes credit cards – like buying a new washing machine from Sears or planning a wedding reception at a hotel – then you can safely assume they will accept credit cards.

But other businesses, like those that replace roofs, pave driveways and install pools, are less likely to take plastic. Make sure you ask beforehand. If they don’t accept credit cards, would they be willing to let you buy the supplies? For instance, if you are having a contractor paint your house, can you buy the paint on your credit card at a home improvement store? Or better yet, can you buy some Home Depot or Lowe’s gift cards for the paint at a place that gives you extra points on your card?

2. Will the vendor charge you a fee?
Even if the supplier of a big purchase accepts credit cards, it might seek to pass along the fees it pays for accepting plastic. Some vendors might offer one price for cash and a higher price for credit cards. Make sure you ask before agreeing to pay on credit. Usually, it is not worth it to pay a higher price just for the sake of earning rewards. If the price is 2 percent higher, for instance, then your additional spending will probably be more than what you will recoup in points or miles. 

3. Do you have enough credit?
It might seem obvious, but make sure your credit limit is high enough to charge your big purchase on your card.

4. Can you still pay off your card?
To keep your credit pristine, you should be paying off your card(s) on time and in full every month. When you make a big purchase, that can be harder to accomplish. If you don’t have ample cash in the bank to pay off your credit card when you make a big purchase, you should consider waiting until you have saved enough money to buy (if possible). Otherwise, your credit score will fall, and you will be hit with expensive finance charges that can add hundreds of dollars or more to the purchase price.

5. Is there a reward limit?
Most reward cards do not limit the amount you can charge and earn rewards, meaning that your only limit is your credit limit. Some cards do cap category bonuses, however. For instance, your Citi Costco Anywhere card gives 4 percent back on gas purchases only up to $7,000 per year. For gas charges after that, the reward rate drops to 1 percent.

There’s nothing wrong with making big charges on your reward card. In fact, it can be a quick and easy way to earn rewards quickly. But make sure you ask the right questions and understand the answers before making such a big expenditure on your card.

See related: In which categories can I get bonus points?, Weighing the value of special card reward deals , Beware of charging big-ticket items just for the rewards

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Updated: 02-19-2019