Introduction
Paying car payments can be a frustrating task that you have to repeat every month. However, what if you could pay your car payment with a credit card? You may wonder if that is possible, and if it is, how does it work? In this article, we will discuss the pros and cons of paying your car payment with a credit card. We will also walk you through the process of making a car payment using a credit card for those who are curious. Additionally, we will highlight some of the best credit cards that offer rewards for making car payments, discuss how paying your car payment with a credit card could affect your credit score, and provide tips for avoiding fees and making an informed decision.
Pros and Cons of Paying Your Car Payment with a Credit Card
The first thing to consider when paying your car payment with a credit card is the advantages and disadvantages of doing so.
Advantages
One of the main advantages of using a credit card to pay your car payment is convenience. It is easy to set up automatic payments, and you don’t have to worry about missing a payment. You can also earn rewards like points, miles, or cashback depending on the card you choose. Additionally, you can lessen the burden of having to come up with a lump sum every month to pay your car payment.
Disadvantages
One drawback of paying car payments with a credit card is the additional fees you will incur. There may be transaction fees associated with using your credit card, which means you’ll have to pay more each month. Additionally, if you’re unable to pay off your credit card balance every month, it could lead to credit score damage. Lastly, you could find yourself spending more than you intended, ultimately racking up credit card debt.
How to Make a Car Payment Using a Credit Card: A Step-by-Step Guide
Now that you have an idea of the advantages and disadvantages of paying your car payment with a credit card, you may want to know the steps of how to do so.
Step 1: Determine if It’s Possible
You cannot always pay your car payment with a credit card. Check with your lender first to see if it is an option. If they accept credit card payments, make sure to ask if there are any extra fees associated with making a payment with your credit card.
Step 2: Gather Your Information
You should have your car loan account number and the amount due on hand, directly from the statement you received in the mail.
Step 3: Log into Your Credit Card Account
Visit the website of your credit card company and sign in to your account. Find the option to add a payee to your account, if necessary.
Step 4: Add Your Car Loan as a Payee
Select the option to add a payee and enter the information listed on your car loan statement.
Step 5: Make Your Payment
Enter the amount due and the date for the payment, and your credit card company will process it. Just like any other payment, it may take several days to process, so double-check the expected payment date with your lender to ensure it will be made on time.
Top Credit Cards That Offer Rewards for Car Payments
If you are searching for a way to earn rewards while paying your car payment, there are several credit cards to choose from. Here are some of the most popular ones.
Chase Freedom Unlimited
The Chase Freedom Unlimited credit card offers unlimited 1.5% cashback on every purchase you make. You can also earn a $200 bonus after spending $500 in the first three months of opening the account.
Citi Double Cash Card
The Citi Double Cash Card offers up to 2% cashback – 1% when you make a purchase and another 1% when you pay. There is no annual fee and no limit to the amount of cashback you can earn.
Capital One Quicksilver Cash Rewards Credit Card
The Capital One Quicksilver credit card offers unlimited 1.5% cashback on all purchases and a one-time $200 cash bonus when you spend $500 in the first three months of opening the account.
5 Questions to Ask Yourself Before Paying Your Car Payment with a Credit Card
Before making the decision to pay your car payment with a credit card, there are several questions you should ask yourself.
Question 1: Can I Handle the Extra Fees?
The fees associated with paying your car payment with a credit card can add up quickly. Ensure that you can afford the extra fees every month.
Question 2: What Limit Is On My Credit Card?
Make sure your credit card has a high enough limit to cover the cost of your car payment, plus any associated fees, to avoid bouncing the payment and facing additional fees or penalties.
Question 3: Will I Be Able to Pay off the Balance on Time?
Using your credit card too much could negatively impact your credit score and lead to debt if not managed effectively. Confirm that you can pay off the balance each month to avoid accruing debt.
Question 4: What Fees Will Be Charged?
Don’t forget to check the fees for making a credit card payment versus other available payment options. You don’t want to pay unexpected and sometimes punishing fees.
Why Paying Your Car Payment with a Credit Card Could Hurt Your Credit Score
One potential disadvantage of paying your car payment with a credit card is collecting too much debt. Credit utilization-the amount of credit in use compared to the available credit limit-should be kept low for a high credit score. If you can’t pay the total balance at the end of each month, then your credit utilization may become too high, leading to a reduced credit score.
How to Avoid Extra Fees When Paying Your Car Payment with a Credit Card
Additional fees associated with paying your car payment with a credit card include transaction fees and interest charges on the unpaid balance. Here are some points to avoid or minimize these fees.
Choose a Card with No Transaction Fees
Choose a card that doesn’t charge transaction fees in order to eliminate any extra fees that could harm your budget.
Pay off Your Credit Card Each Month
Paying off your credit card each month will keep you from accumulating debt and incurring substantial interest charges. You’ll also avoid penalties and potential credit score problems.
Can You Use a Balance Transfer to Pay Your Car Payment?
You can cover your car payment using a balance transfer credit card transfer capped at an introductory rate of 0%, which is helpful for avoiding interest charges. However, using a balance transfer card requires discipline, and once the promotional period is over, the interest rates can skyrocket. As a result, it’s best to be vigilant and pay off the total balance before the promotional term ends.
Conclusion
As demonstrated in this article, paying your car payments with a credit card has some benefits and disadvantages that you should carefully consider. While the advantages include convenience and rewards, the disadvantages include extra fees and possible negative credit score implications if used improperly. By following the guidelines and keeping your credit usage within limits, you can make sure you don’t do any harm to yourself and reap the rewards of using a credit card to pay your car payments.
