You Might Not Realize What Happens When You Spend More Than $10,000 on Your Credit Card

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Credit cards can be super useful when you're making big purchases. Not only can you earn rewards or cash back, but the best credit cards also come with extra benefits like purchase protection.

If you spend $10,000 on your credit card, you'll certainly be doing well on the rewards front. However, there may also be some unintended consequences -- especially if you can't pay it off quickly. Here are a few things to know about charging a lot to your credit card.

1. You could earn some serious rewards

Credit card rewards work differently depending on your card. You might earn 1% to 5% or more in points, miles, or cash back when you spend. Some cards pay a flat rate on all your spending, while others pay extra rewards in certain categories.

Your rewards on a $10,000 spend will vary from card to card. If your card pays an unlimited 2% cash back on all purchases, you could get $200 back when you spend $10,000.

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Be aware that there's often a cap on higher reward categories. For example, a top travel card might offer 5% cash back on up to $1,500 in travel spending each quarter and pay a lower rate once you pass the limit.

2. Your credit score might go down

Your credit score is impacted by the amount of your available credit you're using. It's called credit utilization and it accounts for 30% of your FICO® Score. A lower credit score can make it harder to get the best rates on loans, credit cards, and mortgages.

To understand how a big spend might affect your credit utilization:

• Add up the limits on your credit cards and other revolving credit lines to get your total available credit. The average credit limit in the U.S. is almost $30,000, per Experian.
• Add up your balances, including the amount you plan to spend. Divide this by your total available credit. Multiply by 100 to get a percentage.

Let's say you have a balance of $5,000 on your cards and your credit limit is $30,000. Your credit utilization would be around 17%, which is good for your score. Ideally, you should try to keep your rate below 30%, but lower is better.

If you spend another $10,000 and take your balance to $15,000, you'd be using 50% of your available credit. This would lower your credit score. It's hard to know exactly how much, but it could drop by 25 to 30 points.

3. Your card may be declined

There are a few reasons your card issuer might decline a payment or block your card when you make a large purchase. The first is you don't have enough available credit. The typical credit limit on an individual card can be $5,000, $10,000, or more. If your $10,000 in purchases pushes you over, the transaction will likely be declined.

If you don't normally make large purchases with your card, spending $10,000 could trigger the issuer's internal fraud alarms. If that happens, it will usually message or call you to confirm it is you making the purchase. If you know you're going to spend an unusually large amount of money, contact your card issuer beforehand.

4. Your interest charges may skyrocket

Credit cards can be powerful financial tools. However, the interest charges can be painful if you don't have a card with a 0% intro APR . The average APR on a credit card is over 21%, according to the Federal Reserve. That can quickly add up if your balance is high.

If you spend $10,000 and are unable to pay it off before the due date, you'll be charged interest on the balance. At an APR of 21%, you'd owe $175 in interest in your first month. If you paid it down over two years, you'd pay more than $2,300 in total interest. If it took three years to pay off, the interest costs would come to over $3,500.

That's what makes credit card debt so difficult to handle. The interest payments eat into your budget and mean you have less money available to pay down the balance or use for other things.

Know how you'll pay your balance

If you're going to spend $10,000 on your credit card, what matters most is how you'll handle the balance. If you pay it off straight away, you'll earn rewards and not much else. If you're not able to pay it down, be prepared for interest charges and for your credit score to take a hit.

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