I was scrolling through my Google News Feed and stumbled upon a CNBC article entitled, “This 29-year-old bought a $60,000 Tesla with a credit card and earned an estimated $5,000 in rewards.” I immediately did a double take, bewildered.
Who in their right mind would buy a whole car on a credit card?? Let alone an expensive car like a Tesla! I couldn’t believe it!
Well, 29-year old Keith Rosso and his wife Liz did. They bought a Tesla Model 3 for exactly $58,857 including taxes and fees.
Keith and Liz purchased their brand new car through a third party service called Plastiq because they could not use their Chase Ink Business Preferred credit card to directly purchase the vehicle from Tesla. Plastiq charged the couple a 2.5% service fee, equal to $1470.
I quickly skimmed the article trying to answer my one and only question, “What was the interest rate on the credit card?”
If the interest rate was high, this couple was going to be paying an exorbitantly high price for their new car for years to come. Why wouldn’t they just get a conventional low-interest rate car loan? Why would anyone choose to pay such a high price for a car?
To my surprise, I couldn’t find any mention of the credit card interest rate. That’s because the couple did not pay ANY interest! Before buying the car, the couple had saved enough money through their eBay side business to pay for the car in full so they could avoid any fees and accumulated interest. Through the success of their business, they were also able to obtain a high credit limit of $37,000 and weren’t afraid to even exceed that by $23,000.
“If you use credit cards responsibly, making a large purchase to earn tons of points is an easy win,” Rosso explained. With their Chase Ink Business Preferred credit card, they earned 3 points per every dollar spent; earning them 180,000 points equivalent to a minimum of $1800 and up to $5,000 depending on how the points are used.
The Rosso’s made a calculated decision to buy a car on their credit card. You may not be in the market for a new car but there may be some other large purchases you are considering. You could be in the market for new furniture, a vacation or even a new appliance. How do you know if you should consider buying a large purchase on your credit card?
Here are 3 tips to help you make that critical financial decision.
Disclosure: this post may contain affiliate links. I may receive commissions for purchases made through links in this post.
When Should I Consider Buying High-Cost Items On Credit?
1. If you have the Cash:
Have you ever heard of the saying, “If you don’t have enough to pay for it in cash, you don’t have enough to pay for it twice”?
With high-interest rates, you could be paying double the cost of your purchase over the long run. If you have the money in hand, the wisest decision you could make is to pay your purchase off immediately to avoid paying extra fees and costs.
2. If the Rewards Justify the Fees:
Just like in the Rosso’s situation, many credit cards lure in customers with their exceptional reward offers. A customer may get 1x, 2x or even 3x rewards per dollar. These rewards can add up quickly. However, these credit card companies aren’t giving away free money. Many cards have stipulations and rules for how you earn points on purchases. Make sure you understand these before you make the purchase so that you earn enough rewards to make the purchase worth whatever fees you should incur.
3. If You Can Get Favorable Terms:
When my husband and I furnished our first home, we went to Ashley Furniture to buy our living room and bedroom furniture. At the time, Ashley Furniture was offering 0% financing for 5 years. 5 Years! My husband and I jumped on the opportunity. Utilizing this promotion, we were able to pay only $81 per month for the next 5 years.
Just like the Rosso’s, my husband and I calculated what we could afford to put on credit before purchasing our items. The key here was to make sure our balance would be paid in full by the time our promotional period ended. If there are any remaining balances, many companies will charge you either the full interest or remaining interest. You definitely don’t want to be paying extra fees on your purchases, so understand what the terms are before entering into any contracts.
Before Following in the Rosso Family’s Footsteps, Keep in Mind:
- 1. Keith and Liz were able to obtain the Chase Ink Business Preferred credit card, which allows for a high credit limit because they owned an eBay side hustle.
- 2. The Rosso family used a third party vendor, Plastiq, to buy their car since Tesla wouldn’t let them do so directly. The terms of their credit card did not consider this purchase a cash advance. However, some credit card terms may and fees could exceed 5% of the purchase price. Again, it’s your responsibility to understand the terms and conditions before purchasing a high-cost item.
- 3. They were also able to get a very high credit card limit on their Chase Ink Business Preferred credit card because of their high credit score.
- 4. The Rosso’s were able to get favorable terms from Plastiq because they had a good credit score.
Tell us about your experience when you bought a high priced item on credit. What it worth it?
Are you trying to save up for a high-cost purchase?
Budgeting will make it easier: How to Make a Zero-Based Budget