Home renovations can be expensive. According to Rocket Mortgage®, Americans who are fixing up their homes spend an average of $22,000 on each single project they do, although of course prices can vary dramatically. Your costs depend on whether you’re doing something major like remodeling a kitchen or putting in a pool, or doing something minor like repainting a room.
If you’re going to be starting a remodeling project — and especially a big one — you’re probably focusing on material selections to make your house beautiful. But there’s something else you may also want to think about doing besides hitting up the hardware store. You may want to open a new credit card. Here’s why.
Opening a new credit card could pay off when you’re doing a remodel
There are three big reasons why you may want to consider getting a new credit card if you’re doing a remodeling project.
You may be able to qualify for a sign-up bonus
Many credit cards offer generous welcome bonuses for new card holders. For example, the Wells Fargo Autograph℠ Card (see rates and fees) is offering 20,000 bonus points (valued at $200) if you sign up as a new cardmember and spend $1,000 in the first 3 months. This bonus, available as of mid-February 2024, could put money back in your wallet after you charge $1,000 in remodeling expenses — which is pretty easy to do.
The high costs of paying for home improvements almost always help you hit spending targets, and there are lots of different deals out there, so check out cards offering the highest sign-up bonuses to find one that’s right for you.
You might get access to purchase protections
Many credit cards offer perks like extended manufacturer warranties. If you sign up for a card that does, like the Citi Premier® Card, you can add a long time (24 months, for the Citi card) onto your manufacturer warranty of five years. This could help you out if you’re buying something like appliances for your remodel.
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You can earn lots of rewards by charging remodeling expenses
Finally, you can earn a lot of rewards if you’re charging remodeling expenses. Let’s say you get 2% cash back, as the Citi Double Cash® Card offers. If you charge $5,000 worth of materials for your project, you’d end up getting $100 back — which is a pretty good chunk of change. Using one of the best cash back credit cards can be a smart move for your remodeling costs.
Is opening a new card always the right choice?
Opening a new card can make a lot of sense if you’re going to be able to pay for some or all of the remodeling costs using the card. This may or may not be the case, however.
Often, your contractor will not allow you to charge the services they are providing to you, or will stick on an added fee for doing so. But if you are allowed to buy materials on your own, such as flooring or tile or paint, then you should be able to charge those items if you’re buying them from a retail store. You’ll just want to make sure your contractor is OK with you buying this stuff yourself.
If you are taking out a second mortgage or financing your remodel with a personal loan, you also need to be aware that opening a new card right before doing so might make it harder to qualify for the big loan at an affordable rate.
That’s because the new card will shorten your average age of credit history and there will be an inquiry on your record — both of which impact your credit score. If you’ve charged purchases on the card, that can also affect your debt-to-income ratio, and a lower ratio is preferred.
You can usually get around this issue, though, by getting the mortgage or personal loan first and then opening the credit card account.
You will also want to be 100% sure you can pay off the card in full, because otherwise the interest you’ll owe is going to dwarf the value of the rewards and new sign-up bonus. But as long as you can pay your bills and you’re allowed to charge some remodeling expenses, think seriously about opening a new card early in the remodeling process and charging as much as you can! The rewards and cardholder perks can be well worth it.
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