Buying a home? Rewards cards and balance transfers can help
Score cash back and points with purchases and time to pay off your new debt
Expert on fraud, travel and debt.
Whether you’re purchasing your first home, moving to a larger house to accommodate your growing family or downsizing because of your empty nest, you’ll likely be pulling out the plastic to pay some of your costs.
With every dip or swipe of your rewards card for new-home expenses, such as paint, new furniture or landscaping, you almost certainly could be earning cash back or scoring big rewards to help pay for a future vacation.
“If you’re making big purchases like new appliances, home inspections and furniture, you can get a quick round of rewards for your spending,” says Melinda Opperman, executive vice president of the nonprofit credit.org.
All that spending adds up, though. If you’re worried about running up debt, a balance transfer card can provide breathing room of a year or more at no interest to pay off those bills.
“Just be sure you have a plan to get the balance paid off as fast as possible,” Opperman says.
Here are five ways your credit cards can help you in your home-buying journey:
Before the move
1. Home inspections, contractors, moving expenses
Ask your home inspector and contractors if they are set up to take plastic.
If your real estate agent or contractors don’t take credit cards, it often is because they don’t want to pay the merchant transaction costs. There are ways to get around this, though.
For example, if you’re repainting your new home and your contractor doesn’t accept credit cards, Paige NeJame, franchise owner of CertaPro Painters of the South Shore and Boston, suggests offering to call in to Sherwin-Williams with your credit card to pay the painting contractor’s supplies.
It’s a win-win for the contractor and the home buyer. The contractor gets the needed supplies and doesn’t have to worry about credit card fees and the homebuyer “gets to fly to Europe or wherever 20,000 points will take her,” NeJame says.
Bonus tip: Moving expenses – whether loading a U-Haul or a hiring a moving company – will cost hundreds (renting a truck) or thousands (professional movers) of dollars. Once you’ve closed on your home, putting your moving costs on a new credit card with a big sign-up bonus can help you to meet the minimum spend to unlock those points or cash back.
Lining up home services
2. Cable/streaming, internet, home warranty, HOA
As you settle into your home, you’re apt to be making monthly payments for cable (or streaming services), Internet, a home warranty service and your homeowners association (or condo fees).
If you can put these monthly charges on your rewards cards (without incurring a convenience fee), you’ll bankroll a haul of points through the course of a year.
The trick then is deciding what kind of rewards you want.
When you’re looking for a travel credit card, “not all miles and points are created equal,” says Daniel Tulbovich, co-founder of RewardExpert.com. His recommendation: “Start with your goal, not the card.”
So, if your dream is to fly to Paris for vacation after you’ve moved into your new home, check to see which major airlines fly to your destination and pick a card whose points can be redeemed on that airline. If you get approved for a rewards card with a big sign-up bonus but can’t redeem your rewards for the place you want to go, “you’ve kind of wasted all your miles,” he says.
Check a rewards card’s travel redemption options and airline partners for point transfers and values before applying for a card.
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Settling in at your new address
3. Food, drink, lightbulbs and household cleaners
Once in your home, you will have to stock the fridge, the minibar and maybe the new freezer you’ve powered up in the garage or basement. You may also need lightbulbs that fit your home’s fixtures, and you may be spending more on household cleaners.
All of this can be charged to earn more rewards. If you have a cash back card that pays bonus rewards for groceries, you’re getting some money back with every purchase.
With cash back cards, Tulbovich says, “The vast majority of people prefer simplicity.”
The best flat-rate cash back cards include the Citi Double Cash Card (earning 2 percent back on all spending) and Capital One Quicksilver Cash Rewards Credit Card and Chase Freedom Unlimited (both earning 1.5 percent on everything).
Bonus tip: A few rewards cards offer bonus cash back on grocery purchases. For example, American Express Blue Cash Preferred cardholders earn 6 percent (up to $6,000 in purchases per year) and shoppers paying with their Blue Cash Everyday card earn 3 percent at U.S. supermarkets.
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Making your house your home
4. Furniture, landscaping, storage for all your stuff
Whether buying a new bedroom set, planting a flower bed or adding a backyard shed (to store some of your stuff after you downsized), you’ll be spending a couple of hundred to several hundred dollars.
Open a new cash back card and you could save $150-$200 or more off your total cost of the furniture, landscaping or storage shed with the card’s sign-up bonus.
The Capital One Quicksilver Cash Rewards, for example, will give you a $150 cash bonus if you spend $500 in the first three months after you’ve opened the card.
If travel isn’t on your horizon, and you’ve got home-related purchases to make, Opperman suggests considering a credit card from a big-box store such as Home Depot or Lowe’s, where you may be able to get 0 percent financing for several months.
Just be need to be sure to pay off your store credit card during that time, or you’ll be paying major interest fees on the purchase.
Bonus tip: With frequent flyer program shopping portals, you earn extra rewards on every purchase. For example, shop through the United MileagePlus portal to buy furniture from Macy’s and earn 2 points for every dollar you charge. Or as a Hilton Honors member, you can shop for that backyard shed through the Hilton website and earn 2 points for every dollar spent at Home Depot.
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Dealing with all that new debt
5. Balance transfers, zero interest, breathing room
A new home can means a ton of new purchases – many of them unplanned. These can be small and large. For instance, if you were living in an apartment you didn’t need a lawn mower (small), or once you’re moved in you might want a taller privacy fence around the backyard (large).
If you’ve run up home-related charges on your credit cards, a balance transfer card may buy you some time to pay off your charges. Balance transfer cards usually include an introductory period of 0 percent interest, and a few don’t charge a balance transfer fee (typically 3 to 5 percent).
The breathing room of 12 to 21 months of no interest gives you time to pay off your balance before the introductory period ends and the standard interest rate starts.
“There are certainly savings to be had if your credit score is good enough to qualify for a balance transfer credit card,” says Chris Dlugozima, an education specialist with the nonprofit GreenPath Financial Wellness.
But the cards can create “an artificial sense of relief that’s not really there,” Dlugozima says. And if you run up balances on both your existing credit card and your new credit card, your troubles are compounded.
Thomas Nitzsche, spokesman for the nonprofit Money Management International, says you need to be sure to pay off the balance transfer card before the promotional period ends. “Unless they’re really careful, that can get away from them.”
You don’t want that.
Pay it off earlier, if you can. Set up reminders on your phone of when payments are due. You’ve got this.
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