How to pay for new AC unit?

[Deleted]

Okay, new AC will cost $12,500.  We have options and I would like to hear YM thoughts on these

1. Pay cash, leaving approximately $67,000 cash reserve.  Only other major cash expense anticipated is US income tax, maybe $6,000?
2. Put on a credit card, pay in full at due date.  This option would leave me a very slim margin on my CC credit line for that month, a somewhat greater line open on DH's. 
3. Put on a CC, his or mine or split between the two, and pay out over 6 months or 12 months.  This would let us maintain greater cash reserve (we like having cash on hand) while paying some interest.  NOTE: We always pay our normal CC balance in full monthly, and would continue to do that plus an additional $1,000 monthly toward the AC cost
4. Current interest rate on our CC's is 11.9% and I'm clueless on how to calculate the cost of interest over 6 or 12 months.
5. Hybrid approach of paying $6,000 cash and putting $6,000 on CC with extra $1,000 monthly (over basic balance) going to payoff.  
6. I'm leaning toward #5

[CCL]

Can you earn cash back on the credit card charges?

[Deleted]

Apr 5, 2022 17:03:52 GMT -5 CCL said:

Can you earn cash back on the credit card charges?

Yes, 1%

[resolution]

I think it would be a mistake to pay interest on a credit card when you have enough cash to pay for the unit. Did you ask if they have a cash discount? If they have a cash discount I would pay with cash.  If there is no cash discount, I would put it on the credit card and pay in full before the due date.

I did something similar with mine last month, except that I didnt have a high enough credit limit for the whole charge, so they broke it into 1/3 when they ordered the equipment, 1/3 when they started installation, and 1/3 when they finished. I just paid it off the day after each charge went through so I had credit available for the next charge. I used a 2% cash back card, so I ended up with a good amount of cash back from it. 

[Cookies Galore]

Does the HVAC company offer any 0% interest financing? We spent $10,000 on a new furnace and AC unit a few years ago and just financed it, and paid the remaining balance in month 17. I'd rather just simplify and do that.

[azucena]

I'd ask if the hvac company charges extra for cc payment. Ours did so we wrote a check.

[Deleted]

I agree with asking about a cash discount. Even if you get cash back from your credit card, the cash discount is likely to be a little better since the merchant charge has to pay for that cash back plus profit and expenses of the credit card issuer.

Having said that- what's the likelihood you'll need the rest of the $67,000 for anything besides the taxes you mentioned? Emergency car replacement? Other home repairs? Unreimbursed medical expenses? And will you be adding money back in? As long as you're not nervous about draining your cash and needing it for something later, I'd go with that if you can get a discount.

[Deleted]

Apr 5, 2022 17:49:55 GMT -5 Cookies Galore said:

Does the HVAC company offer any 0% interest financing? We spent $10,000 on a new furnace and AC unit a few years ago and just financed it, and paid the remaining balance in month 17. I'd rather just simplify and do that.

No financing offered through the company

[Deleted]

Apr 5, 2022 17:53:17 GMT -5 azucena said:

I'd ask if the hvac company charges extra for cc payment. Ours did so we wrote a check.

They do not charge a fee for CC use

[Deleted]

Apr 5, 2022 17:59:23 GMT -5 @athena53 said:

I agree with asking about a cash discount. Even if you get cash back from your credit card, the cash discount is likely to be a little better since the merchant charge has to pay for that cash back plus profit and expenses of the credit card issuer.

Having said that- what's the likelihood you'll need the rest of the $67,000 for anything besides the taxes you mentioned? Emergency car replacement? Other home repairs? Unreimbursed medical expenses? And will you be adding money back in? As long as you're not nervous about draining your cash and needing it for something later, I'd go with that if you can get a discount.

The $12,500 reflects a $600 discount for buying an annual maintenance plan each year.  

Unlikely we'll need the cash reserve for anything in the foreseeable future and we accumulate cash each month.  It's more an emotional thing than financial, I guess.  I don't think we would even flinch but we spent $14,000 last month to buy DH's car.  That, plus fed tax, will be more $$ spent this year than in the last 3 combined.   

[Ava]

I would pay in cash. Don't pay interest if you can avoid it.

You can also shop around. Don't accept what the first company offers without making sure there aren't better deals out there.
My friends recently had to do their roof and they found a company that did the work and offered zero interest financing.

[Tiny]

I would NOT carry this debt on a credit card(s) unless you were NOT paying interest (ie a 0% offer).

What about opening a HELOC - I assume you have equity in your home.

I'm not sure if lenders are offering HELOCs I got mine before the pandemic - I paid nothing for a 30K line of credit. I got a 12 month teaser rate that was 1% or so and after 12 months it had a variable rate (that was kind of high - it was a no cost HELOC -- but it was much less than any of my credit cards). I continue to get 'teaser rate' offers usually for 3 to 6 months. This works out perfectly for me - as I tend to do short term debt and I'm willing to pay a small amount of interest for the convenience.


I've also see credit cards that are offering a bonus AND 12 to 18 months 0% interest on purchases.
Would finding and applying for a new Credit Card with a 0% offer do the trick?  

Otherwise I would just pay cash. 


(isn't funny how sometimes we don't want to take on debt - the weird fear of debt - but we also fear spending a large amount of cash.  ) 

[Deleted]

Thanks to everyone for the advice - you folks are the best! It's sometimes hard to sort out the dollar side and the emotional side of money stuff

[TheOtherMe]

I have rolled all of this around in my head about my bathtub to shower conversion.  I have a $30,000 HELOC with a zero balance.  I have wondered about put it on like 3 credit cards and paying it all off with the money sitting in my "high yield" savings account that doesn't even pay 1% interest.  

It won't go on the HELOC because I am not paying interest.  

If there would be no fee, I can handle the cash back bonus.  If they only take cash, then I will write a check.

[daisylu]

I keep have 2 high limit CCs open, so I would charge it to one card for the cash back and then do a balance transfer to the other. They are always offering zero charge/0% interest for at least 12 months. Though DH is adverse to any sort of debt and would likely pay it off in 6 months anyway.

[minnesotapaintlady]

Apr 6, 2022 9:23:29 GMT -5 daisylu said:

I keep have 2 high limit CCs open, so I would charge it to one card for the cash back and then do a balance transfer to the other. They are always offering zero charge/0% interest for at least 12 months. Though DH is adverse to any sort of debt and would likely pay it off in 6 months anyway.

The 0% offers are plentiful, the no fees is getting much harder.  All the offers I've seen on all my cards have 3-5% transfer fee.

[chiver78]

a 1% cash back seems light. there's a lot of cards out there offering way more, in various flavors of perks*. many have introductory periods of 0% on purchases for a few months, too. maybe this is the opportunity to research some CCs that have perks that better suit your lifestyle and needs? especially since you're typically paying them off each month, even if it came with a slightly higher interest rate than what you currently have, it might make sense to make the change. or, at least open another for this particular planned expense. 

* for example - I opened one this year, that basically allows me to triple-dip on some purchases in the form of reward airline miles. it also gives me 6x miles on the cost of flights purchased with that airline card. there's a lot out there since the last time you looked.

[jeffreymo]

Apr 6, 2022 10:58:34 GMT -5 chiver78 said:

a 1% cash back seems light. there's a lot of cards out there offering way more, in various flavors of perks*. many have introductory periods of 0% on purchases for a few months, too. maybe this is the opportunity to research some CCs that have perks that better suit your lifestyle and needs? especially since you're typically paying them off each month, even if it came with a slightly higher interest rate than what you currently have, it might make sense to make the change. or, at least open another for this particular planned expense. 

* for example - I opened one this year, that basically allows me to triple-dip on some purchases in the form of reward airline miles. it also gives me 6x miles on the cost of flights purchased with that airline card. there's a lot out there since the last time you looked.

Agree with this. You should be able to find a card that will pay 1.5% AND has a $200 kicker for hitting a certain spend amount in the first 3 months etc… which this purchase would put you easily above that type of requirement. Chase Freedom Unlimited is one.

67k in cash seems to me to be a comfortable cushion - but I could be totally wrong. I’d sign up for the Freedom Unlimited and charge the unit to it. Then pay the balance in full with the cash. After 3 months you’ll have $387.50 in cash rewards.

[Artemis Windsong]

Buy the unit outright from savings then pay yourself back monthly.

[countrygirl2]

Our Bank of America card is 5% back, we've had it for sometime.
We charged hubs new truck on it to get the points, then paid it off.
Worked out well.