People keep credit cards with them not only for regular purchases and emergencies, but also for buying expensive commodities like cars, electric appliances, etc. So, can you buy a car with a credit card?
You can buy a car with a credit card. But, you must consider a lot of factors before doing so. You have to think of your financial condition and consider if you can pay back the amount or not. Otherwise, it can be disadvantageous for you.
Though not all car companies would allow you to pay via a credit card, most car brands permit credit card payment. However, it is not commonly done by buyers to use a credit card for buying a car.
Let us learn in detail about the different aspects of buying a car with a credit card.
Advantages And Disadvantages Of Buying A Car With A Credit Card:
Before I mention the factors that you must scrutinize before buying a card with a credit card, let me outline some advantages and disadvantages of using a credit card to buy a car.
Advantages:
- If you buy a new credit card from certain companies, they would offer you a 0% APR. And you can pay back the amount from six months to two years without paying any interest. If you pay before the due date, you won’t need to pay any loan fees.
- If you pay with a credit card, the car is signed in your name immediately. You can even buy car insurance when the car is in your name.
- Certain car companies offer rewards and cash back when you pay with a credit card. If you have enough credit balance, you can choose to pay with a credit card to get rewards.
Disadvantages:
- Most credit card companies charge higher APR. The interest rates are higher which may not be convenient for you if you need years to pay back the amount.
- You don’t have a certain time to pay back the amount when you use a credit card. This means you need to keep track and pay back responsibly. If you fail to do so, you may take a long time to pay back and the interest rate would keep increasing.
- If your utilization rate goes up, it would negatively impact your credit score. If you take a long to pay back, your credit score decreases gradually.
Do You Have Enough Credit Limit To Buy A Car?
Before you buy a car using a credit card, know the credit limit you have. If you have a less credit limit than you need to make the purchase, you should consult your issuer first and place a request to increase the credit limit.
If you have a good credit report and record, you are likely to get an increase in your credit limit. If you get to increase the limit, you can use the card to buy the car. Otherwise, there is another solution.
If you have two credit cards issued by the same company, you can request the issuer to transfer the credit limit from one card to another. So, the credit limit on one card would increase which you can use to make the payment.
However, as discussed before, it may affect your credit utilization rate. If you exceed the credit limit of the card, you would end up deteriorating your credit score as well as your credit utilization rate.
Therefore, be careful and wise while using your credit card to buy a car.
Have You Consulted Your Issuer Before Buying Your Car With A Credit Card?
To avoid any further problems, debts, or other issues, you must tell your issuer that you are going to buy a car using your credit card.
Know how much credit limit you have. Ask about the interest rate you have to pay and if you get a reduction in APR or not. Learn how the purchase can affect your credit score. Consult to know the best way of using your credit card to buy a car. Because your issuer knows the best.
Also, if your issuer suddenly notices a large number of transactions, he may doubt a fraud case. As a result, he may block your credit card or hold back the transaction.
Can You Pay Back The Amount After Using Your Credit Card For Buying A Car?
Will you be able to pay back the amount? Or you are just buying the car with a credit card because you don’t need to pay the amount straight away? If that is the case, you are probably making a huge mistake.
Scrutinize your current financial condition first before you buy a car with a credit card. Don’t get excited to see the cashback or reward offer. Because if you can’t pay back, you would end up paying a large amount of fine which would be significantly greater than the reward you get.
The amount you pay initially would determine how much money you would get as a reward. But mostly, you are going to get 1%-2% of the amount deposited. But, if you fail to pay back the entire amount fast, the interest rate would go up. And as it goes up, it is adding more money to the initial cost. So, the amount you have earned from the reward would simply go down the drain as you need to pay more interest than that.
Even if you have a new credit card with 0% APR, you must pay the amount within a certain period of time. If you fail to do so, you have to pay interest. So, ultimately you threaten your financial state for getting a small reward that wouldn’t actually save money.
Conclusion:
You can buy a car with a credit card. But you should only do it if you have enough credit limit and capability to pay back. Otherwise, it would be a cautionary decision.
Think twice and be wise before buying a car with your credit card!
