Most lenders in the United States do not accept credit cards for car loan payments, but if yours does, you should think twice before using it. If you are not attentive, you may find up paying more than the original amount of your car loan.
How to Make a car payment from credit card
Even if your lender does not accept credit cards directly, there are various methods to pay with them.
Credit Cards with reward programs
According to Experian, Americans paid an average of $716 a month for a new car in Q4 2022. The average loan payment for a used car was $526 per month.
Car loan rates have risen, which might result in expensive monthly payments. You should be aware that most lenders will not accept a direct credit card payment on a vehicle loan. Even if they did, there would almost certainly be a convenience fee.
This is a fee that a lender charges you for the convenience of using your credit card. The fee is usually between 2% and 3%. However, if your auto dealer takes credit cards, you have another alternative.
Zero Percent Introductory Purchase APR Credit Card
You may avoid the loan process entirely by purchasing a car using a credit card that has a 0% initial purchase annual percentage rate. This method allows you to use your credit card to make interest-free payments. The introductory durations for these cards range from 12 to 21 months. However, you'll need a credit limit large enough to cover the cost of a car, as well as a dealer who will accept a credit card as full payment.
It's something to think about if you believe you can pay off the loan in that time frame and have excellent credit. However, once again, convenience fees may apply.
If you miss a payment, you may lose the 0% APR. The usual rate will be substantially higher, so unless you're on top of your payments, this isn't suggested.
Credit Card for Balance Transfer
You can also transfer your car loan to a balance transfer credit card. Assume you have a $10,000 car loan. You could move the loan amount to a credit card if you have excellent credit and qualify for a balance transfer credit card.
Balance transfer credit cards provide a 0% introductory purchase APR for a set period of time, usually between 12 and 21 months. As a result, this is yet another opportunity to use your credit card to make interest-free payments. However, you may be charged a balance transfer fee of 3% to 5%.
Making a Balance Transfer
Technically, this is a possibility, but it has drawbacks. Companies that provide this service, such as Western Union, have relationships with businesses that participate. As a result, you might find your payment with a credit card through Western Union or a similar money transfer service. Your credit card company may classify it as a cash advance. If this is the case, you will be charged transaction fees as well as a high APR on the amount moved.
You can pay off your debt with no interest if you use a credit card with a 0% introductory APR. Transfer fees must be considered, but the interest savings may be worth it. There's also the possibility of earning a huge number of rewards if you use the correct rewards credit card. But, before you take a risk, make sure you grasp the drawbacks, since there are several to consider.
