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Using Credit Cards to Pay For Renovations

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Credit Cards to Pay For Renovations

Plastic has become one of the hottest commodities in home renovations these days… Not, as a building material, but as a way to pay for them! More and more homeowners are opting to put their remodeling costs on their credit cards. While personal check is the still leading form of payment, it's not the only method in use. A recent study by the National Association of the Remodeling Industry shows that 28% of companies reported customers using plastic, making credit cards the second-most-popular form of payment used in 2012. Why?  There are several reasons.

First, you don't have to worry about all of the red tape of qualifying for a loan. Think of it this way – if you went to the bank and asked for $10,000 to fund your remodeling project, the lender would have to run your credit report, draft up paperwork, and then you'd have to agree upon terms including interest rate, monthly payments, etc. All of that is already taken care of if you have a credit card. When you signed up for the card, you accepted the terms of use, including the interest rate and minimum payment amount.

So, as long as you can be responsible about paying off credit card debt, there's less hassle involved. For this reason alone, more homeowners are deciding to use what's already in their wallet to pay for that newly remodeled kitchen, instead of going out and getting a new loan.

Another great reason to use plastic? The rewards!
Many credit card companies have reward programs for cardholders who use the card regularly. The more you charge to the card, the more reward points or cash back you receive. So, if you're going to spend the money anyway, you might as well receive perks for it, right?

The Wall Street Journal reports this is an especially-popular trend among higher-income families who have large homes and want to make expensive renovations. Elite-level perks include weeklong vacations to the Caribbean, ski trips to Utah, and access to private events for meet-and-greets with famous athletes, celebrities, or chefs.Other cards offer trips to special events like the Sundance Film Festival in Utah, the Super Bowl, America's Cup sailing race, or the Indianapolis 500. And, if the balance of the card is paid in full each month, some companies add even more reward points. Other cards offer cash back, usually 1-to-2% of the amount spent on the card – which is a higher percentage than most bank deposit accounts offer.

So, the thought among cardholders who decide to pay for their renovations with plastic is this: “If I'm going to have to write a check at the end of the month, why not write it to my credit card company instead of my contractor, and receive a reward for the money spent?” Home renovation specialists and supply companies don't argue with that logic, either. After all, when you swipe your card, they get their money, regardless if you pay the credit card company or not.

However, there are some things to consider first.
Like any credit card purchase, the danger lies in whether or not you are responsible enough to pay off the balance each month. If you can't afford to make a home renovation right now, don't put it on your card. That may lead to you having a debt that you can't pay, and late credit card payments can have a negative effect on your credit score. In other words, this payment option should be reserved for homeowners who can currently afford, regardless of method of payment, to make the upgrades and renovations to their home. But if you've got the money, and are ready for some home improvements, putting it on plastic is an option you might want to consider!
 


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