Do I have to use credit cards to pay? No. Here’s why.


Since the start of the pandemic, many people have been spending more time working from home. In fact, some people intend to work from home permanently. This, in turn, helped fuel an interest in renovations.

In a recent LightStream Poll, 44% of homeowners say they want to renovate this year. But 35% say they intend to use a credit card to pay for the renovations. This could be a potentially dangerous move.

The problem with credit card balances

It’s one thing to charge the cost of a home improvement on a credit card and pay it back right away. It could actually be a smart move, as it could net you a nice amount of cash back or reward points.

SUBSCRIBE TO OUR NEWSLETTER: The Daily Money delivers our best personal finance stories to your inbox

But charging home renovations to a credit card and paying off that balance over time isn’t such a good move. Credit cards are known to charge significant interest on carried over balances. In total, your renovations could cost you much more than expected if you use a credit card to pay for them.

Plus, having a credit card balance that’s too high could actually lower your credit score. Once this happens, borrowing could become more expensive the next time a need arises.

RENOVATING YOUR HOME? You may have even more competition this year

A better way to finance home renovations

If you’re looking to spruce up your living space and can’t pay for the work directly with cash or savings, then it’s worth exploring different options. renovation financing options before applying for a credit card. First, you may consider removing a Personal loan, which allows you to borrow money for any reason. Personal loans tend to charge much less interest than credit cards. And they’re a good bet if you’re an applicant with a good credit score.

Another option, if you have a decent amount of home equity, is to borrow against it via a home equity loan or line of credit. Both options tend to come with affordable interest rates, although they are a bit different. With a home equity loan, you borrow a lump sum just like you would with a personal loan and pay it back in equal installments over time. With a home equity line of credit, or HELOCyou have access to a line of credit that you can draw on over time – typically lasting five to 10 years.

CHANGE OF INTEREST RATE: How the Fed Rise Will Affect Your Wallet and Finances

If you’re not sure what you’ll end up spending on renovations, a HELOC might be a good bet, as it gives you the flexibility to start borrowing less and increase that amount as needed. But when you take out a HELOC, you’ll usually be hit with a variable interest rate on the amount you borrow. This means that your payments may not be as predictable as they would be with a home equity loan.

Either way, it pays to explore different borrowing options before resorting to a credit card to finance your home renovations. It could save you a good amount of money, not to mention prevent your credit score from taking a hit.

Read our free review

The best credit card waives interest until 2023

Motley Fool Offer: If you have credit card debt, transfer it to this top balance transfer card guarantees you an introductory APR of 0% in 2023! Plus, you won’t pay any annual fees. These are just a few of the reasons why our experts consider this card a top choice to help you control your debt. Read our full review for free and apply in just 2 minutes.

We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.


Comments are closed.