Can You Really Buy a House with a Credit Card?
When it comes to buying a home, the idea of using a credit card might seem appealing, but is it really practical? The short answer is: Not really. Putting the entire cost of a home on a credit card isn't advisable, even if you have high credit limits.
Taking a home loan is a more standard and preferred way to purchase a house, as it offers the added benefit of tax deductions under Section 80C (for principal payments on home loan EMIs) and Section 24(b) (up to ₹2 lakh per year for interest paid on the loan).
However, you can use your credit card for the down payment, especially in metro cities where the down payment often exceeds ₹10 lakh.
Note:
You might have to pay an extra amount that covers the MDR charges for the builder on top of the down payment amount. Hence, it’s important to check with the builder about MDR charges before making the down payment. In some cases, MDR can be negotiated to 0%.
Let's look at the benefits of making a down payment of the house with a credit card:
1. Reward Points
By using premium credit cards, you can earn massive reward points, cashback, or statement credits. Using multiple cards can amplify your reward opportunities across various issuers.
2. Spend Milestone Rewards
Since the down payment is usually quite large, you’ll likely reach your monthly or yearly spend milestones, unlocking additional rewards such as flight tickets, vouchers, and membership upgrades.
3. Offers on Credit Card Points with Lifestyle Brand Partners
Once you’ve made the down payment, your accumulated reward points can become more valuable. Credit card companies often provide enhanced redemption rates with lifestyle and luxury brands, giving you extra savings!
4. Exclusive Bank Offers on Large Transactions
Some banks run bonus reward or cashback campaigns for high-value purchases, such as 5X reward points during festive periods. These offers can significantly add value to your down payment.
Important Points To Keep In Mind Before You Swipe Your Card for a Home Down Payment:
1. Ensure Sufficient Liquid Cash
While you’ll enjoy an interest-free period, make sure you have enough liquid cash to clear your credit card bill before the due date to avoid high interest charges.
2. Negotiate the MDR Charges
Talk to the builder to see if you can negotiate the Merchant Discount Rate (MDR). You might be able to lower it to 0.5%.
3. Confirm the Maximum Amount Allowed via Credit Card
Check with the builder whether they allow full down payments via credit card or if there’s a limit on the amount you can pay this way.
4. Check Your Credit Card Limit
Make sure your credit card limit can cover the down payment. If not, contact your bank to temporarily increase your limit for the transaction.
Important:
A high credit utilization ratio (over 30-40%) can negatively affect your credit score. Ensure you have enough available credit and keep utilization in check.
5. Understand Daily Reward Point Caps
Many premium cards have daily caps on reward points, so review your card’s terms to ensure you maximize your earnings.
6. Verify the Builder’s Merchant Category Code (MCC)
Verify the MCC with the builder, as certain categories may not be eligible for reward points or cashback. It’s essential to know this ahead of time.
Conclusion: Should You Buy a House Using a Credit Card?
Making down payment of the house with a credit card can unlock massive rewards, milestone benefits, and even loyalty program advantages. However, this decision should be carefully driven by multiple factors:
- Effective reward earnings: After accounting for the extra MDR charges (typically 1-3%).
- Availability of sufficient liquid cash: Ensure you can pay off the full credit card bill before the due date.
- Overall financial planning: Ensure that using a credit card for the down payment aligns with your broader financial goals.
If the net reward value after deducting MDR charges isn’t lucrative enough, it may be wiser to use traditional payment methods for your down payment, such as direct bank transfers or certified checks, to avoid unnecessary fees and complications.
Final Thought:
While it's essential to take advantage of tax deductions by opting for a home loan to purchase a house, you can certainly use premium credit cards like HDFC Infinia and Axis Magnus to make the down payment. This allows you to earn greater rewards on these big-ticket purchases, making it a smart way to leverage your credit card benefits.
📢 Stay Tuned for More!
Enjoyed this blog? Stay tuned for more insights, tips, and strategies to make smarter decisions when buying high-value assets—because every major purchase today could be a stepping stone toward securing your financial future tomorrow.
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