Should You Pay for Home Improvement with Your Credit Card?

Paying for home improvement using a credit card may see like a bad idea, especially since the financial crisis of 2008 made everyone more aware of the risks of carrying too much credit debt. If you have an emergency (your roof caves in, your plumbing is leaking) a credit card may be your only short-term solution to getting the problem fixed right away, especially if you are strapped for cash. However, if you are making extensive home improvements that will increase the value of your property, a credit card might not be the best way to fund your improvements.

Making home improvements and paying for those improvements using a credit card causes two problems: one, the interest rate at which you will be paying back the financing is normally quite high and two the interest you pay is not deductible. If you obtain a home loan, home equity loan, or refinance with cash out for home improvements, however, you can deduct the interest you pay on the loan, reducing your tax burden. This makes the improvement even more cost effective because it reduces the amount of taxes you pay, increases the value of your home and increases your overall net value.