Credit card rewards are amazing. You can earn miles and redeem them for trips and the more you spend with your credit card, the more points your rack up. But the strategy is a bit more complex than that.
Usually, we feel like making big purchases will make us earn points more quickly. If you have to make a big purchase, like remodeling your house, then you might want to use your credit card to get something in return for all the big spending.
However, here are some things you should know:
1- Make sure the merchant accepts credit cards
Merchants have to pay a 2% or 3% fee for every credit card transaction, so not all of them accept it as a payment method. Before you even get started, you need to make sure that they will accept it.
If they accept credit card payments, you still need to make sure that the merchant is part of a reward program. Otherwise, you will not get any points for making that big purchase.
2- Find out if there is a surcharge for using credit card
As we mentioned above, merchants have to pay a fee for every transaction. So it is not that crazy to think they might impose a surcharge to your transaction. And if it is a big one, the surcharge can be huge. There are some states where this practice is illegal, so check before buying!
3- Find out if the company offers a cash discount
As tempting as a reward program is, find out how much you’d save if you paid cash. If the discount is greater than the reward, then you might consider going for the cash option instead.
4- Check if your card issuer will approve the transaction
When you need to make large purchases, it is usually a good idea to check with your credit card issuer to make sure they will approve the charge. You need to have enough credit lines, but even if you do, they might flag the transaction as a suspicious one.
5- Check how this will affect your credit
A considerable portion of your credit score is determined by your credit utilization ratio: this is basically the amount of debt you have compared to how much credit available you have left.
Even while paying your balances in full, a big purchase can have a temporary impact on your credit score. You can avoid this by making large payments before the statement period ends, this way you will reduce your statement balance and its impact on your overall score.