Quck answer
Earning credit card points for home renovations can be a great way to save money and maximize rewards. Here are a few key things to know:
1. Choose a credit card with relevant bonus categories: Look for cards that offer bonus points for home improvement purchases or for spending in categories like home improvement stores or contractors.
2. Plan your purchases strategically: Take advantage of promotional offers or sales to make larger purchases, maximizing the points you earn.
3. Consider using a home improvement store credit card: Some home improvement stores offer their own credit cards with special financing options and rewards programs that can help you earn points specifically for renovation expenses.
4. Pay off your balance in full each month: To avoid interest charges, it’s important to pay off your credit card balance in full each month. This way, you can enjoy the benefits of earning points without incurring any additional costs.
By following these tips, you can make the most of your credit card points and save money on your home renovations.
With 72% of homeowners in the United States planning to renovate their homes in the next six months, many are seeking ways to maximize their renovation expenses. A recent report by NerdWallet revealed that Americans are financing these renovations through savings, cash-out refinancing, personal and home equity loans, and credit cards.
When used wisely, using credit cards for renovations can be a great way to make your money work for you and enjoy some amazing perks. Modern credit cards offer rewards such as cash back, early access to events, exclusive airport lounge access, and points for hotel stays and plane tickets.
If you’re curious about how it all works, we consulted experts to find out how homeowners can responsibly use credit cards to pay for their renovations while earning significant rewards.
Determine What Can and Cannot Be Paid for with a Credit Card
Last year, Bankrate found that 57% of homeowners planned to pay for their renovations with credit cards. If you choose to use credit cards for your renovation, the first step is to determine what expenses can and cannot be charged. Labor is one of the biggest costs in a renovation, but keep in mind that most contractors do not accept credit cards as payment. They usually prefer cash, checks, or wire transfers.
Some renovation items that can be paid for with a credit card include major appliances, cabinets, and flooring. Making these significant purchases with a credit card can earn you more rewards. Most credit cards have an introductory period in which you must spend a certain amount to qualify for rewards, ranging from $500 to $5,000. If you want to earn rewards quickly, purchasing more expensive home furnishings can help you reach the introductory spending requirement.
“Appliances are obvious home expenses that can be purchased with a credit card not only to earn rewards, but also because many credit cards offer additional perks such as purchase return protection,” says Nathan Grant, a senior credit card analyst at Credit Card Insider, in an interview with Hunker.
Credit Card Insider recommends four credit cards that offer purchase return protection, and the website also provides a guide to each major credit card company’s return protection policy. Purchase return protection means that if an item breaks from normal use outside of the store’s return window, users can file a claim with their credit card company. By providing a store receipt, credit card statement, and evidence that the store won’t accept the return, the purchase may be eligible for a full refund.
Brian Jung, a personal finance blogger who advises over 800,000 subscribers on his YouTube channel, regularly shares credit card tips. He was also featured in the Netflix special “Money, Explained.” When it comes to using credit cards for major purchases, Jung advises Hunker readers to do so strategically and have a plan to pay off the balances at the end of the month.
“Nowadays, it is possible to purchase almost anything using a credit card, especially when shopping at a retail store. However, it is important to ensure that your credit limit is sufficient for the purchase. I always recommend paying off the full amount unless you are taking advantage of a 0% APR promotion on the card. While credit cards can be helpful for managing cash flow, it is never worth paying interest on purchases that you cannot afford,” advises Jung.
Consider opting for a store-brand credit card. Although most credit card experts advise against this due to high interest rates, it may make sense to get a credit card from a home improvement store if the interest rates are low. If you frequently make purchases from a specific store and can avoid paying interest while enjoying perks such as discounted delivery or daily deals, it is worth considering a store card.
Jung shares a story with Hunker about a friend who recently signed up for the Lowe’s credit card with a 0% APR promotion. While Jung generally does not recommend in-store credit cards since major issuers often offer better rewards, the no-interest promotions on larger ticket items for home renovations, such as flooring and appliances, can sometimes make sense.
Timing is crucial when applying for a credit card. If you are planning to qualify for a mortgage, Jung advises against applying for new credit cards as the companies will conduct a hard inquiry on your credit score. On the other hand, soft inquiries occur when you check your own credit or when a credit check is part of a background check. Soft inquiries may appear on your credit report but do not lower your credit score. However, having too many hard inquiries can have a negative impact on your score.
If you are not in the process of applying for a home loan, Jung suggests waiting until you are closer to making a significant purchase before applying for a card. Most cards require a minimum purchase amount within the first three to six months to earn promotional points or rewards. Making a substantial purchase can easily help you meet this requirement.
It is important to choose the right credit card based on your goals. Are you saving up for a dream trip to Hawaii or simply looking to put money back in your pocket? Search for cards that offer the best rewards for your lifestyle.
“First, find credit cards with the best sign-up bonuses available at the moment and apply for one before making your larger purchase. Once you have accumulated those points, you can either cash them out or use them for future travel, effectively receiving a discount of at least 20% on your current purchase due to the reward rates offered by current card issuers,” suggests Jung. “For example, if you spend $5,000 and receive $1,000 back in credit card rewards, you are essentially getting free money while maximizing the free benefits available to everyone right now.”
Be Aware of Your Limits
If you already have outstanding debts and limited cash reserves, it may not be wise to accumulate more credit card debt. It would only add to the stress of managing excessive credit card debt during an already stressful renovation. However, for many homeowners, taking advantage of promotional offers while making major purchases could help fund their next vacation or put money back in their pockets.
Grant suggests, “Ideally, it is best to avoid carrying a credit card balance from month to month in order to avoid interest charges and negative effects on your credit scores. So, even if you are seeking rewards or flexibility in your spending, remember to pay the full balance stated on your monthly statement. Alternatively, if you have a 0% APR card, make sure to pay off the entire balance before the promotional offer period ends. While you should never apply for a credit card just for fun, if you have expensive purchases coming up, a sign-up bonus can provide a substantial discount.”
