How to Choose a Credit Card for New Homeowners

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Owning a home may be sweet, but it certainly isn’t cheap! 

Buying a new house can be super exciting.

It can also be super expensive.

Whether you’re getting a turn-key house you need to furnish, or rolling up your sleeves with a fixer-upper, chances are pretty good you’re going to be putting a small fortune on your credit cards after the keys hit your hand.

Choosing a credit card to cover all of your new home’s new expenses is about balancing your specific needs. Rewards are obviously a big part of the process, but don’t discount other benefits like interest-free intro offers. Here are some things to consider.

Maximizing rewards for maximum return

One of the best things about modern credit cards is that you can find a rewards card for nearly any type of purchase — including for many of the things you’ll be buying for your new home.

Of course, the downside to all those options? All those options.

Zeroing in on your rewards needs can be complicated, especially if you’ll be shopping in a variety of places. So, the first step is to make a list of your biggest expenses. For example, if you know you’ll be making some repairs or upgrades, you may want to put the hardware store at the top of your list.

Once you have a clear idea of which categories your expenses will fall into, you can start looking for a card that offers bonus rewards in the largest number of those categories. If you’re buying a house full of furniture while also putting down large utility deposits, for instance, a card that rewards both of those categories with bonus rewards would be ideal.

On the other hand, you may wind up with a list of expenses that don’t fit neatly into any card’s bonus categories. In that case, the best option may be a card with a good flat-rate on all purchases, such as a 2% cash back card. That way, you’re covered no matter where your needs take you.

Big purchases = big bonuses

Besides ensuring you’ve picked the best categories to maximize your rewards, it’s a good idea to look at sign-up bonuses, too. This can be especially great if you have some large purchases that won’t fit into a bonus category.

Basically, sign-up bonuses give you a lump sum of cash back or points when you meet a set spending requirement in a certain amount of time (90 days is typical). The larger the bonus, the bigger that spending requirement tends to be.

Since buying a new house can involve all kinds of fairly large purchases — the price of renting a moving truck alone can reach four figures — you can potentially go for big bonuses you would normally struggle to meet.

If you want an easy way to recoup some expenses, focus on cash back bonuses. If you want to plan ahead for a nice vacation to de-stress after moving and/or renovating, a travel rewards card with a nice bonus could get you a free trip to a quiet beach.

No interest in interest fees

Speaking of large purchases…If you already tapped deep into your savings to get through the home buying fees, then you’re likely looking for ways to save now that you’re a homeowner. While rewards and sign-up bonuses can help, what might be the most useful is a long intro APR offer.

Normally, if you carry a balance on your credit cards — that is, if you don’t pay in full each month — you’re charged interest on that balance. And since credit cards tend to have very high interest rates, those fees can get expensive very quickly.

That’s where the intro 0% APR offers come in handy. Many cards come with some type of introductory offer that gives you a 0% interest rate for a set period of time. For instance, a card with a 12-month intro APR offer won’t charge you interest on your purchases for the first 12 billing cycles.

The key benefit to these deals is they let you pay off your purchases over time, since you won’t need to worry about accruing any interest fees.

Avoid deferred interest

One thing to note about no-interest deals is to make sure you read the fine print, specifically noting what happens when the intro offer expires.

With a regular 0% APR card, you’re only charged interest on any balance that remains once the promotional period ends. However, there are some cards — I’m looking at you, store credit cards — that instead use deferred interest.

With deferred interest financing, you only pay 0% interest if you pay your balance in full before the end of the promotional period. If any balance remains, you’ll be charged interest on the entire balance. Only use deferred interest financing if you’re 100% certain you can pay off the full amount before the promotional period ends.

New cards after, not before

Regardless of which new card you decide to open, there’s one important thing to keep in mind: your mortgage loan.

You should avoid opening any new credit cards while you’re still in the home-buying process. Any big changes to your credit profile could negatively impact your home financing. It’s generally recommended to avoid opening any new credit cards in the six months before you buy a house.

Additionally, after everything is said and done, don’t forget that you’ve just taken on a huge debt. That new financial burden will likely impact your credit scores, as well as dictate how much money you have to pay off other debts. Both of these will influence a credit card issuer’s decision on whether to approve your application for a new card, as well as what type of credit limit to grant you.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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