How to identify what qualifies as a large purchase on a credit card

Quick insights

• Large purchases are generally classified as any purchase amount that would put you over 30 percent of your credit utilization.
• You may want to notify your card issuer before making a large purchase to help ensure a smooth transaction.
• Putting large purchases on your credit card may help you earn credit card rewards faster.

Credit cards can be very useful when it comes to making large purchases. Not only may your credit card include purchase protections, but you could earn credit card rewards or points too. If you're thinking about putting a large purchase on your credit card, there are some important things you may want to consider. Most notably, are you able to pay off the balance? In this article we'll go over the potential benefits and considerations of using your credit card for large purchases. In addition, we'll outline some strategies for paying off those larger balances.

What is considered a large purchase

What is considered a “large” purchase may be somewhat subjective. To some people, a $1,000 expense could feel large while others may put that figure closer to $10,000.

A more straightforward classification is tied to your credit utilization ratio, which compares your available credit with your credit limit. Typically, a large purchase to your card issuer is one that would put you over 30 percent of your credit utilization, the percentage most experts agree you should stay under. For example, if you have one credit card with a credit limit of $2,500, a $1,000 purchase would consume more than a third of your available credit. However, if you have $40,000 in available credit spread over multiple cards, a $1,000 purchase may not affect your credit utilization.

For the purposes of your personal finances, there are a few ways you could choose to classify something as a large purchase:

• If the purchase exceeds a certain dollar amount. 
• If it equals a significant portion of your monthly income.
• If it would require an adjustment to your monthly budget.
• If it has an impact on your short-term or long-term financial goals.

If you use your credit card for everyday spending, a large purchase also could be considered anything that is outside of your normal spending.

Potential benefits of using a credit card for large purchases

There are a few benefits of using a credit card for large purchases. They include:

• Security:Credit cards can provide a convenient and secure way to make large purchases. This is true especially if you’re making an online purchase or are in a situation when carrying a large amount of cash isn't practical or safe.
• Rewards:You may be able to earn rewards when using your credit card for large purchases. If your credit card offers 1x points or more on most purchases, putting a large purchase on your card can help you earn rewards quickly. For example, if you put a $2,000 purchase on the Chase Freedom Unlimited^® card—which has a 1.5x rewards rate on most purchases—you may earn 3,000 points on that purchase.
• Purchase protections: Credit cards may offer purchase protections that other payment methods may not. Some credit cards offer protection that can cover damage or theft for a certain period after the purchase.
• Credit history: Putting a large purchase on your card may also be a good move if you’re looking to build your credit history. Regularly using your credit card and making timely payments can be beneficial in demonstrating your creditworthiness when applying for loans or other credit in the future.

Considerations when using credit cards for large purchases

Before you put a large purchase on your credit card, there are a few things you may want to consider, including:

• Debt: If not managed properly, large purchases can lead to credit card debt. This is especially true if you're unable to pay off your balance in full and start accruing interest.
• Credit utilization ratio: Large purchases can increase your credit utilization ratio. A high credit utilization ratio may negatively impact your credit score.
• Potential for overspending: Credit cards can make it easier to overspend. Before putting a large purchase on your card, consider if it is within your budget or can be paid off in a reasonable time frame.

Notifying your credit card issuer about large purchases

It may be a good idea to notify your card issuer when putting a large purchase on your card. This notification can help ensure that your purchase is not flagged as fraudulent and may increase the chance that your transaction goes through smoothly. If the purchase is outside the norm of your typical card usage, your account could get flagged.

To notify your card issuer about the purchase, you’ll want to call customer service. The number will likely be printed on the back of your card.

Strategies for paying off large purchases

Once your purchase is on the card, you’ll need a plan to pay it off. That could be paying a certain amount each month toward your card until it's paid off or planning on making a large payment if you have an influx of income—like a tax refund—on the horizon.

If you have a Chase credit card, you may be able to utilize Chase Pay Over Time^® to pay off your large purchases. Chase Pay Over Time enables eligible cardmembers to break up an eligible purchase into budget-friendly payments. Choose from flexible payment options that work for you and your budget. Keep in mind, a Pay Over Time plan for an existing purchase doesn’t accrue interest. Instead, there’s a fixed monthly fee.

When making a purchase that you can’t pay off within one billing cycle, you might want to use a credit card with a low interest rate. If possible, you may be able to find an introductory APR credit card offer, allowing you to put the purchase on the card without paying interest for a specific period.

In summary

There are benefits to putting a large purchase on your credit card. They may include accumulating rewards points, purchase protections and building up your credit score. However, these may only be beneficial if you have a plan to pay off your purchase. Large purchases that cannot be paid off within a billing cycle can accrue interest. If your purchase is large enough to skew your credit utilization ratio, you may want to call your card issuer to give them a heads up on the transaction. This may be helpful to ensure a smooth purchase that isn’t flagged by your card issuer.