26 Jun How can I balance a large purchase on a credit card?

Q. I have several credit card accounts but I primarily use one of them because I get cash back. It has a higher interest rate than the other cards. I have to make a large purchase that I won’t be able to pay off in one month. I hate to give up the points by using one of the lower rate cards but I also hate the idea of paying a higher rate on what could be six months of time before I can pay it off. Is there some kind of strategy I can use or what should I do?
— Spender-to-be

A. We’re glad you’re taking the time to think this through.

While it’s great to get perks like points, miles or cash back on a credit card, it’s important not to lose sight of the overall net cost.

For example, cash back rewards are only a benefit after you weigh the higher interest rate, said Jeanne Kane, a certified financial planner with OneDigital in Boonton.

“If you pay off your balance each month, your strategy of using the higher interest rate card to get cash back allows you to get a nice benefit,” she said. “If you carry a balance, the interest rate that you’re paying can easily outweigh the cash back reward.”

Kane said she’s not a fan of carrying a balance on a credit card, particularly one with a high interest rate.

By carrying a balance, you’re making it that much harder to pay off the purchase because credit cards tend to have higher interest rates than other borrowing options, she said.

“Credit card interest is typically based on an average daily balance and calculated daily. This means that you can pay interest on top of interest,” she said. “It also means that any additional purchases in the month are added to the balance.”

If you use the card and you pay off the equivalent of what you bought during the month, you’re still paying interest on those charges, she said.

You also need to approach this decision with a debt paydown strategy. There are several ways to go.

You can start with the highest interest rate debt as your target. First. collect all of your debt information – how much you owe, interest rate, minimum monthly payments — and organize the bills with highest interest rate to lowest interest rate.

“Pay the minimum monthly payment on all but your highest interest rate debt,” she said. “Pay as much as you can towards the highest interest rate debt. You will pay down the highest rate debt the fastest.”

Then once you pay it down, move on to the next highest interest rate debt and continue with the same strategy, Kane said.

Or, you can focus on the cards with the lowest balances first.

“Pay the minimum monthly payment on all but your lowest balance debt. Pay as much as you can towards the lowest balance debt,” she said. “Once you pay the lowest balance debt down, move on to the next lowest balance debt and continue with the same strategy.”

You’ll like this method if paying off bills helps motivate you to keep going, she said.

Kane said you should consider if you really need to make the purchase now or if you can take some time to save the funds you need. Then you can charge it to your cash back card and then pay it off right away.

You could also consider a balance transfer card.

“You could make the purchase on the high-rate cash-back card and then transfer the balance to a card with a lower rate,” she said. “There could be a fee or other restrictions if you choose this strategy. Know the rules before you transfer.”

If you own your home, you could consider a home equity line of credit, Kane said. You won’t get cash back, but the rate is probably lower than your credit card. You’ll also need to ask yourself whether it’s worth leveraging your home for this upcoming purchase.

Also look to your emergency fund, which should be three to six months worth of expenses.

If you have one, you could use the money to pay for this purchase without owing any interest at all.

Email your questions to Ask@NJMoneyHelp.com.

This story was originally published in June 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.