Should You Make a Car Payment Using Your Credit Card?

Many people, when they have credit cards that offer rewards, want to put everything on their cards. This way, they reason, they can rack up the reward points faster. After all, $200 to $500 every month on your credit card starts to add up significantly over time. However, just because you can put your car payment on a credit card doesn’t mean you should.

First Things First: Will The Finance Company Even Let You?

Before you get excited about putting your car payment on a credit card, you will need to make sure the car finance company will let you. Some finance companies don’t have a problem with you using your credit card to make payments; as long as they get their money, they are happy.

Other companies, though, are not so sanguine. Some lenders view it as too much of a risk. What if you reach your credit limit and the attempt to collect the money is denied? Call your auto lender and find out what the policy is, and then find out the process. You may need to pay an extra fee, or jump through some hoops in order to pay your car loan with a credit card. Take these items into consideration as you make your final decision.

Most companies will not let you put your loan payments on a credit card, but they may let you use credit for a deposit or a portion of your down payment.

Using Your Credit Card to Pay On Your Car Loan

If you are allowed to use a credit card to make your car payment, you need to make sure that the transition happens smoothly. You may need to cancel an automatic debit from your checking account, and set up the new payment plan. Be sure that you have at least two weeks before your next payment is due to make these arrangements. To be safe, you can start the process as soon as your latest payment clears.

When you do make car payment with your credit card, it is important to avoid carrying a balance. The rewards you get for using your card for payments will be overset by high interest charges. Plus, if you carry a balance, you are getting hit with interest twice. You pay interest on your car loan, and you will pay a second (higher) interest fee when you carry the payment from month to month on your credit card.

You will also have to incorporate the fact that you are adding a car payment to your credit card. If you use your credit card for other spending in order to get the rewards, make sure you have plenty of room on your card for the car payment. If you don’t you might find a mess as the transaction is denied – and be charged a fee. Or, you could end up with a hefty over the limit fee from the credit card issuer if the transaction does go through.

In the end, you might find that making your car payment with a credit card is more trouble than it’s worth. However, if you are disciplined, and have a solid plan, it can actually be a way to boost your rewards.