A lot of people believe they can’t afford basic home improvements like upgrading a bathroom, updating a kitchen or replacing interior flooring because they don’t think they can outright pay for the materials and work that needs to be done. They incorrectly think that their only option is to either save up the money over time, apply for an unsecured loan from a bank or to take out a secured line of credit or loan against their home’s equity. If, however, you don’t have much equity and your credit is not quite as stellar as it could be then there is still another way to pay for those much needed home improvements: credit cards.
Yes, we’ve all read the news stories that claim that credit cards and access to easy credit is what brought on the economic downturn, what sunk the American economy and what essentially brought the housing and job market to its knees. But the real story is a little more complex than that. Overuse of easy credit, especially inflated home equity, did essentially create a bubble of fake value that made everyone feel much wealthier than they really were. It was not credit cards or borrowing money that hurt the economy: it was banks making loans to people who couldn’t afford to pay the money back that eventually caused all the problems. Banks are still not lending much money directly through cash loans which means there still isn’t much of a chance for people to begin buying things and generating jobs, but there is one form of credit which, though restricted, is still being used quite regularly: credit cards.
Credit cards are a much safer form of credit for banks to issue than most other loans because their balance is often restricted to a much lower amount than a regular loan, their interest rate is often higher (which means there is less risk to a bank of losing money) and they can be used for small or large purchases so they are flexible for you, the consumer. Though it’s impossible to say exactly which credit card is best for home improvements, it would be fair to say that there are a number of very good cards which can fit a variety of needs and budgets. If you have a project that needs to get done around your house then you may want to consider a using a credit card even if you have the cash already saved. Here’s why:
Quick and Secure: Credit cards are quick and secure and a heck of a lot safer than using cash for any sort of job or project where you’re buying materials or labor because credit card purchases are guaranteed. Yes, you can walk into a cabinet store with $5,000 in cash, but then you have no recourse when you find that some of the cabinets you bought are damaged or don’t fit the way they were advertised. Credit card companies will often fight for consumer rights and have some guarantees built into them by law.
Points and Rewards: Reward cards are actually quite useful, especially when you’re going to use them for larger purchases. You might as well get some points that can be used to upgrade your appliances or go on a vacation or even get some free gas. If you were to pay the same amount of money in cash for a product then you wouldn’t get those added benefits. Some credit cards even give a percentage of the cash you spend back to you, which equates to a discount on your purchases over the year.
Additional Discounts From Home Improvement Stores: Some credit cards, like credit cards from a home improvement store, will give you discounts on their products and services as long as you buy things in their store. This is essentially another discount that’s available to use that you cannot take advantage of when you use cash or check or money borrowed through a traditional bank or lending institution. Of course, the big hardware stores offer their own brand of credit cards. You can get a Lowe’s Credit Card as well as a Home Depot Credit Card and both usually offer zero percent interest rates and other discounts when you first apply.
Immediate Equity Value Increase: Though most home improvements do not increase the value of the home above the initial cost of the project initially, over time those improvements can begin to pay off, especially as equity builds throughout the years. If, for example, you were to use a credit card to finance a basement finishing project you would obviously add some value to your home, though probably not the cost of the project. Even with the interest you pay, though, you’ve increased your living space and five to ten years from now your home will be worth much more than an identical home in your neighborhood without a finished basement. Investing in your home, especially if you’re increase living space or setting your home apart from the others in your neighborhood in a big way will often, in the long term, pay for itself when you go to sell your home. If you’re using a credit card to increase the energy efficiency of your home or improving your home for a medical reason then that home improvement could lead to tax breaks that you can enjoy in the next calendar year.
Obviously, you shouldn’t use your credit card unwisely or purchase things you know you cannot afford. Plan carefully and conservatively and weigh the pros and cons of using a credit card to pay for a home improvement now or try to save the money up for the purchase on your own. Each situation is different, but sometimes you’ll find that spending a little money (and interest) up front can have huge pay-offs in the long run, especially when it comes to projects designed to improve your house.