Charge it! Could be a wise interim solution or the worst long-term financing strategy ever.
Most solar contractors will allow a property owner paying cash for a solar electric system to use a credit card. Most often, this would be for the initial deposit. With others, every installment may be paid with a credit card.
A credit card is the only acceptable form of payment with some solar contractors. Still, others will not take a credit card payment at all.
One thing that those who take credit cards have in common is that they will pass along any credit card charges to you. They add about 3% to the price unless you negotiate otherwise. It may be possible to have these charges waived in the case of the initial deposit. Much less likely that the solar contractor will absorb the credit card fees for all payments.
With financing solar, it is most common that the property owner is not required to make any payments in the case of zero down payment plans. There will be a signed contract, commitment to financing, and penalty payable in the case of cancellation.
In the case of a cash transaction with the opportunity to use a credit card, ask yourself the following questions:
- Will you be charged a fee to use your credit card?
- What rewards does your credit card offer?
- Will you pay off this balance with the next statement or transfer the balance to a new credit card offering an interest-free incentive? What will the transfer cost?
- Will you only charge the amounts you expect back in solar tax credits?
- How will an extended credit card balance negatively impact your credit score?
- Will you have the cash to invest in solar soon, but not right away?
The answer will be different depending on every property owner’s circumstance.
No, is the answer if you were planning to carry the balance on a high-interest credit card without a very near-term plan to pay it off.
Yes, if it is a new credit card offering an extended interest-free balance or attractive cash back for the first transactions.
When in doubt, get professional financial advice. Always compare using your credit card to paying with cash or financing through solar lenders, mortgage brokers, banks and credit unions. Solar leasing is an option, though not recommended due to the lack of ownership, expensive payments and punitive buyout provisions, if you sell your home and the buyer does not wish to continue making lease payments.
At first blush, using a credit card to make such an important long-term investment may seem like a very bad idea. However, given the right circumstances, a well-thought-out strategy using interim credit card debt may represent an opportunity!
