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I charged a lot on my card to pay my taxes and buy some building materials for my home renovation. Learn why this isn’t a disaster for my finances. [[{“value”:”
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Having a large credit card balance may seem, on the surface, like a financial disaster. But I have a huge balance right now — I owe somewhere around $76,000 — and I’m actually extremely happy about owing so much.
Here’s why I’m pleased to owe an absolute fortune to my credit card company.
A big credit card balance isn’t always bad news
I was able to charge a whole bunch of purchases I had to make anyway, and since I could put them on my credit card, I was able to earn a lot of rewards points for them.
Specifically, I have a big credit card balance for two reasons: I charged the quarterly estimated taxes I owe as a freelance writer, and I charged a whole bunch of building materials, including flooring and appliances, for a large remodeling project that I’m currently doing on my house.
I had to pay the taxes and buy these items, and since I was able to put them on my card, I was able to earn a whopping $1,995 in credit card rewards because my card pays me 2.62% cash back. Now, I did have to pay a fee to charge my taxes, but the fee is less than the rewards I earned. And there was no fee to charge the building materials at all, so I get to pocket the entirety of the rewards that I earned.
In addition to getting so much cash back, I know I also have the fraud protections my card offers. So if there’s an issue with my appliances being delivered or they come defective and the manufacturer won’t help me, I can always dispute the charges with my credit card company. It’ll help me avoid being scammed out of money, as it’s done for me in the past.
If you have big purchases to make, as I did — whether it’s for a home improvement project or new electronic devices or car repairs — it’s absolutely worth looking into whether you can charge those items on a card offering you the maximum possible cash back. After all, the more you’re spending, the more rewards you can earn to help defray those costs.
There’s one caveat to keep in mind
While I am very happy to owe such a large balance, there is one very important factor that makes it OK that I owe $76,000 on my credit card: I have that much money in my savings account to pay the bill as soon as the statement comes. I’ve been saving for my taxes and my remodel for a while, so the money is there and ready.
If I didn’t have the cash to pay off my full balance, that $76,000 would be an absolute disaster. After all, the APR on my credit card is 20.24%, so interest charges on such a large balance would cost me around $1,304.25 per month. It wouldn’t make sense to use my card in this situation when I could probably get a personal loan charging a lower rate.
So, before you run up a huge balance — even for necessities — be sure you have the money in the bank to pay it off in full. If you don’t, consider whether a different and cheaper method of borrowing (like that aforementioned personal loan) could be a better option for you.
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