|by Jason Steele|
We recently received this question from a reader:
What’s the best credit card out there right now for home improvement? I can’t find anything even remotely close to what was offered just a few years ago…
Undertaking a home improvement project is a huge task. Smart homeowners will plan out the entire project in advance in order to optimize their spending on time and materials. Even smarter people, like you will plan out their payment strategy in order to minimize costs and/or maximize rewards. Good for you for planning ahead.
Well Christina, there are a few options out there for you to maximize your rewards. The first consideration would be if you are paying off your balance in full, and are looking to maximize your rewards, or are you paying your balance over time, and looking to minimize interest.
If You Are Paying Your Balance In Full
If that is the case, you should seek to maximize your rewards and discounts. One strategy you might consider is to open up the Home Depot credit card when you make a really big purchase. It allows 10% off of your first purchase when you apply. Save that one for major appliances or other large spending.
Once you have taken advantage of that offer, you will want to maximize your return on the rest of your spending. The Discover card had an offer of 5% cash back on home improvement stores, but only between April and June of 2009. It is unclear if that promotion will return. They are offering 5% cash back at grocery stores from October until December. While you probably can’t find many home improvement supplies at your grocery store, you can purchase gift cards valid at home improvement stores, earning your 5% indirectly. Double check to make sure there is a grocery store near you that supplies the gift cards for a good home improvement store. Also make sure that they accept Discover, as it is even less widely accepted than American Express.
If you want to keep things real simple, just sign up for the Schwab Visa that offers 2% on all purchases. Visa is accepted everywhere, and there is no having to worry if the place you are purchasing supplies counts as a “home improvement” store.
If You Are Carrying A Balance
To be sure, I am strongly against carrying balances on credit cards, ever. You would be much better off getting a home equity loan, or just saving money until you can afford to pay for your improvements.
That said, it is also possible that you have a leaky roof or some other unsafe condition that can’t wait. If that is the case, consider a credit card with the lowest interest rate. The Lowe’s home improvement card also offers a six months “no payments and no interest” promotion on purchases over $299. This would be advantageous if you feel like you can pay it off within those six months, otherwise, you are just paying interest as usual on the entire balance come next year.
There are also many other cards with low introductory rates. Just be very careful reading the terms and conditions. Once the introductory period expires, any purchases made will continue to accrue interest until the lower interest purchase are paid in full first. This will change under the Credit Card Bill of Rights, but not until next year.