Buying a car is a huge decision that should be made with research and planning. Part of that work includes figuring out a way to pay for your vehicle, which normally means taking out a loan since most people don’t have enough extra cash to pay for a car outright.
While most car dealerships have their own in-house financing options, you could also opt to pay for a car with a rewards credit card that lets you earn points or miles for each dollar you spend. If you have a credit limit of around $20,000, for example, you could easily cover the cost of a new ride and possibly earn rewards points at the same time.
If this is an option you’re looking to take advantage of, here are a few things to consider.
How can I buy a car with a credit card?
There are many factors to keep in mind before you charge your new ride to a credit card, the most important of which is the interest rate you’ll pay. Since credit cards, on average, charge much higher interest rates than auto loans, you’ll only want to charge a car to your credit card if you have a plan.
For example, it could make sense to pay for a car with a credit card if you have the cash in the bank to cover the purchase. You could charge your car to your credit card, earn some rewards then pay your balance in full before any interest accrued.
Charging a car to your credit card can also make sense if your credit card has a zero percent introductory APR offer. This would let you pay your car off without interest for a limited time and potentially earn rewards along the way. Just note that, when your card’s introductory offer ends, you’ll be stuck paying your credit card’s ongoing variable interest rate.
Step 1: Check with your credit card provider
Whether you decide to buy a car with a travel credit card or a card with a zero percent introductory APR on purchases for a limited time, you’ll want to check with your credit card issuer to make sure the purchase will go through.
If your credit limit is high enough to accommodate the amount you want to charge, you’ll still need to notify your card issuer to inform them of the charge ahead of time. If you don’t, it’s likely that a large and unusual transaction like a car purchase will be flagged for fraud.
If your credit limit isn’t high enough, you might have to ask for a credit limit increase. Since it’s possible asking for a credit limit increase will result in a new hard inquiry being placed on your credit report, however, you may want to consider applying for a new rewards credit card instead.
If you picked up a new credit card for the purchase, you could earn rewards for each dollar you spend and a generous sign-up bonus.
Step 2: Find a dealer who is willing to accept credit cards as payment
This next part may prove tricky since many car dealerships would prefer to steer you toward their own auto financing options instead of accepting credit cards as payment. Either way, you’ll need to ask the dealer you’re working with if they’ll let you pay for the purchase with a credit card.
Some car dealerships will not accept credit cards as payment…….Read More>>