Some individuals choose to use a credit card account as if it is a loan account. In this case the cardholder makes a large purchase and then submits regular monthly payments to pay off the balance. If you plan to process a large charge on your credit card in the near future, consider whether you should notify your credit card company in advance.
Making a Large Purchase
The definition of a large purchase varies depending on the individual account. Generally, a large purchase is any amount that well exceeds the average of your past charges. Check your history of purchases to see if the creditor might consider the amount of the item that you plan to buy as higher than normal.
Notifying the Creditor
It is often best to notify the credit card company before purchasing a large-ticket item from a store. If the credit card company notices a large charge that seems out of the ordinary, it may flag the charge as fraudulent. If it is flagged, the creditor may decline the charge or charge it back to the merchant after a review. In this case you’ll receive a call from the creditor asking you to verify your information and prove the legitimacy of the large purchase you attempted.
Though it is often wise to notify the credit card company of a large charge in advance, it could also create a problem. If the credit card company learns that you plan to make an expensive purchase, it could decide to limit your available funds. That decision depends on economic factors, your account history and a periodic check of your credit report. For instance, if the creditor learns that you’ve maxed out on all of your other card accounts that could send up a red flag and cause the creditor to limit your spending ability.
Instead of using your credit card account as if it were a loan account, first attempt other financing options. Credit card interest rates are high, with the average around 14.72 percent as of 2011. Attempt to borrow the funds from a loved one and draw up a promissory note with regular payments until the loan is repaid. Some major retail stores offer store cards with low or zero interest rates if you pay off the purchase within a certain number of months.
- Lending Tree; Using Credit Cards for Large Purchases
- Bargaineering; Call Your Credit Card Before Big Purchases; Jim Wang; Nov. 9, 2006
- SmartMoney; Banks Lowering Consumers' Credit-Card Limits; AnnaMaria Andriotis; Nov. 14, 2008
- WalletPop; Average Credit Card Interest Rates Continue to Climb; Feb 1, 2011; Martha C. White