Homeownership gets expensive. In addition to mortgage payments, you face the financial burden of upkeep, repairs and occasional remodeling projects.
If you’re new to the homeownership game—or about to be— it pays to use credit cards to your advantage.
“When you buy a home, you know there are going to be a lot of expenses that come along with it. But that also means you have opportunities to make some big purchases with a chance to earn rewards or save money,” says David Weliver, credit expert and publisher of the Money Under 30 blog. “And even if you’re thinking of using credit cards as a financing tool, there are some options for that side of things as well.”
Look for new cards only after closing
Before plotting how you’re going to utilize credit cards for remodeling projects or new furniture and appliances, make sure the house is yours.
“The most important thing I can stress is that you should not apply for any credit cards before you close on your mortgage,” says credit card and travel journalist Jason Steele. “Lenders are deeply concerned about people taking out a loan to pay for a loan, and they’re going to run a credit check on you sometimes just hours before closing. You want to be as financially conservative as possible before you sign on the dotted line.”
Steele recommends avoiding any new credit applications or big purchases at least two months before closing, as any significant alterations to your credit report could result in losing your mortgage qualification.
“People think about the house they’ll have in three months so they start putting furniture and appliances on credit cards, which is a big mistake,” says Beverly Harzog, credit card expert and author of Confessions of a Credit Junkie. “I’d suggest waiting until a few months after you’ve moved in before making big purchases on credit. Give yourself some time to make sure you’re handling your finances well.”
The store card option
As a new homeowner you’re probably going to be making frequent trips to hardware stores and home improvement outlets. That’s where store credit cards can work to your advantage.
For instance, the Lowe’s Consumer Credit Card has no annual fee and gives 5 percent off every Lowes purchase at checkout, which, Steele says, could add up to hundreds of dollars in savings each year.
The card also gives you the option of deferred interest financing for six months on purchases of $300 or more—although you have to forego the 5 percent discount when you do this. The APR is a steep 26.99 percent, but if you don’t plan on carrying a balance longer than six months, this could be a good option for financing a large project.
Conversely, the Home Depot Consumer Credit Card doesn’t come with any discounts or rewards, but it does offer six months deferred interest on purchases of $299 or more.
Be aware that deferred interest is not the same thing as the 0 percent intro rates you find on mainstream credit cards.
Rather, the retailer is promising to set aside interest until after the six-month period is over. If you pay it off before the deferment ends, you’re set. If you don’t, you’ll pay interest on the total purchase cost, not merely the amount that’s left over.
“The idea of getting home improvement materials, electronics, appliances or labor now and paying later could be appealing, but deferred interest is something that gets a lot of people in trouble,” says John Ganotis, founder of CreditCardInsider.com. “Let’s say you make $10,000 in purchases. Even if you only owe $1 after the deferment ends, you may have to pay interest on the entire $10,000 amount over the whole course of the loan.”
Another option for DYI-homeowners is the Ace Rewards Visa card, which gives users 10 points for every dollar spent in rotating quarterly categories, and 15 points for all Ace Hardware purchases year-round. What’s more, users get a $25 Ace gift card for every 12,500 points they earn.
Finally, Weliver also recommends the Target REDcard, which gives 5 percent off on all purchases (even sale and clearance items), free shipping and an extended return period.
“Being a homeowner isn’t all about renovations and repairs—it’s also about keeping your home stocked with everything from food to basic household supplies,” says Weliver. “If you frequently shop for those things at Target, 5 percent off is really enticing.”
The rewards card option
In addition to rewards-earning potential, rewards cards offer savings on home-related purchases.
For instance, the Discover it card offers 5 percent back on four rotating categories, which in the past have included home improvement stores, wholesale clubs and Amazon. Users get the 5 percent deal only on their first $1,500 in spending per quarter (after that it drops to 1 percent), but they can also find discounts of 5 to 20 percent on online and in-store purchases through Discover Deals.
The Chase Freedom credit card offers similar 5 percent back on quarterly categories—which often include home improvement stores in the spring—with a 0 percent introductory APR.
“You’re going to be hard pressed to find a better rewards rate in the home improvement category,” says Weliver. “And the 0 percent intro rate can also be used as a limited financing tool.”
If you’re not interested in keeping up with rotating categories consider a cash-back card that offers elevated rewards on all purchases, such as the Citi Double Cash Card. You’ll get 1 percent cash back on all transactions at the point of purchase and an additional 1 percent when you pay the bill. Plenty of other cards on the market offer a flat 1.5 percent at the point of purchase.
If you’re more interested in financing power for a larger home repair or renovation, consider Citi Simplicity, which comes with an impressive introductory 0 percent APR for the first 21 months and no annual fee.
“That’s really remarkable, and it’s better than anything you’re going to get from somewhere like Home Depot or Lowes,” says Steele. “But you have to make sure you are completely able and determined to pay the balance within those 21 months or you’re going to get hit with some heavy interest.”
Finally, it’s not a bad idea to call each of your current credit card providers to ask about any upcoming rewards or discounts.
“Call your card companies, tell them you’re getting ready to work on a home project, and see if they’ve got any special deals to offer you,” says Scott Bilker, author of “Talk Your Way Out of Credit Card Debt” and creator of DebtSmart.com. “Maybe you missed a promotion that came in the mail or just haven’t been keeping up on new offers. Either way, it doesn’t hurt to ask.”
Portals and purchase protection
Some credit card issuers provide rewards portals, where cardholders can earn additional discounts when shopping at certain retailers. For example, Shop Through Chase, Barclaycard RewardsBoost and the Citi Bonus Cash Center are portals that give you boosted rewards (5X or more rewards in some cases) if you click through to a partner retailer, some of which include home supply stores.
“There’s not really a downside to using a portal like this, but it can be confusing to find out where you can get the best deal,” says Ganotis. “Sites like Evreward can help you compare discounts available from different portals.”
Finally, credit cards give you the ability to dispute purchases, which may give you peace of mind when making the more expensive charges that come with homeownership.
“Whether you’re buying expensive appliances or hiring a contractor for a renovation, purchase protection can be really important,” says Steele. “I had some work done on my deck and paid the contractor in advance with a credit card. If he had failed to provide the expected service I have some very robust protections under the Fair Credit Billing Act that I wouldn’t get, had I just written him a check and never saw him again.”