Whether or not you can pay car payments by credit card depends on the lender. While some car dealers will accept car payments by credit card, many only accept car loan payments via bank transfer, check, debit card, and other non-credit forms of payment.
But even if it’s possible, is it a good idea to pay car payments with a credit card? Before charging your car payments, it’s best to consider all of the ins and outs — particularly the costs you might face.
Key Points
• While most car lenders and finance companies do not accept credit card payments for monthly car payments, some lenders may accept this form of payment.
• Many lenders will charge a processing fee, which can range from 2% to 4% of the payment amount.
• If you can pay your car payment with a credit card, it can help you earn rewards and build your credit score.
• Be cautious of high credit card interest rates, which can increase the overall cost if you don’t pay the balance in full.
• Always verify with your lender whether they accept credit card payments and what fees, if any, apply.
Paying Car Payments with a Credit Card
Even if a lender does not allow individuals to pay off a car loan directly using their credit card, there are several ways around this limitation that still enables buyers to charge their car payments.
Third-Party Credit Card Processors
While a lender may not accept credit cards directly, they may accept card payments that are facilitated by a third-party processor. In such cases, a lender may work with one specific processing company or they may accept funds from any processor that facilitates credit card payments.
It’s important to note, however, that while such processors may make it possible to charge car payments to an individual’s credit card, such payments are typically subject to extra fees, often based on a percentage of the payment.
Recommended: Cosigner Loan Requirements
Balance Transfer Credit Card
Balance transfer credit cards allow the account holder to transfer the balance owed on another loan onto that credit card. However, there may be some restrictions on the type of debt that can be moved.
For example, some balance transfer credit cards only allow an individual to transfer over existing credit card debt, meaning that if the car payment wasn’t initially made by credit card, that balance would be ineligible. Other balance transfer credit cards may allow individuals to transfer other types of debt, including car payments.
One restriction that many balance transfer credit cards typically have in common is that they don’t allow an individual to transfer a loan that was originally obtained from that same lender. So if a car loan was obtained from a specific bank, the buyer would likely not be able to pay for that loan using a balance transfer credit card issued by the same bank or its affiliates.
Recommended: Selling a Car With a Lien
Cash Advance
Credit cards also typically offer cash advances, which allow an individual to withdraw money against their credit card from an ATM or bank branch. A cash advance is not the same as withdrawing money from a checking or debit account, or even other types of credit card purchases.
While a cash advance provides the card holder with access to immediate cash flow, which they can then use to pay for essentially anything they want, cash advances carry different lending terms than other credit card purchases. They are subject to interest (often at a higher rate than the APR on purchases), and there’s typically no interest-free grace period, even if the advance is paid back by the statement due date. You may face other fees, as well.
Additionally, the cash advance limit on a credit card may be lower than the credit card limit itself.
Money Transfer
It may also be possible to pay for a car with a credit card if the lender accepts money transfers. However, it’s a good idea to check with the credit card issuer before initiating a money transfer, as this type of transaction may be treated like a cash advance and ultimately cost more due to the resulting interest charges and fees.
Recommended: Down Payment Size and Auto Loans
Pros and Cons of Making Car Payments with Credit Cards
Just because it may be possible to make car payments with a credit card, it doesn’t always mean it’s the best choice. Here are some pros and cons of charging car payments.
Pros of Making Car Payments with Credit Cards
• You can carry a balance with a credit card. While car payments are due in full on the due date each month, credit cards allow an individual to pay only the minimum by their statement date and then carry a balance. Although it’s never a good idea to charge more than one can afford (and outstanding balances are subject to interest charges), this can be an option in the event that unforeseen expenses make cash flow tight in a given month.
• Flexibility with payments. It also provides more flexibility timing-wise, allowing an individual to make a payment when it suits them (for example, on pay day), instead of their monthly auto loan due date.
• May get credit card rewards. Charging big-ticket items to a rewards or cash-back credit card may increase benefits and earnings (if car payments are eligible under the rewards program).
• May receive 0% introductory APR on balance transfer. Some balance transfer cards offer promotional periods with 0% APR charged on loans that are moved over from elsewhere. In such cases, it may be possible to save on interest.
• Reduces risk of car repossession. Auto loans are typically secured, using the auto itself as collateral. This means that if the buyer fails to make payments, their car can be seized. But credit card debt is unsecured revolving debt, reducing the risk of car repossession.
Cons Making Car Payments with Credit Cards
• Substantial fees. Many of the workarounds that enable a car buyer to charge payments to their credit cards incur sizable extra fees. Whether it’s a 3% processing fee charged by a third-party who can facilitate payment, ATM fees, higher interest or cash transfer fees, or even prepayment penalties for paying off the balance in full, these all increase the cost of buying a car. Ultimately, paying by card could cost more than the original car loan or than the cost to refinance a car.
• Credit score may be affected. Credit scores are determined, in part, by an individual’s credit utilization ratio, or the percentage of available credit that they are using. While some credit utilization is a good thing — it shows lenders an individual can manage their credit effectively — too much signals risk to the lender.
• May pay more in interest. 0% APR offers on balance transfer cards often only apply for a promotional period — and interest climbs after that. If the car loan is not paid off before the new interest rate kicks in, the buyer may end up ultimately paying more for their car.
How Might Paying Car Payments With Credit Cards Affect Your Credit Score?
As mentioned previously, making car payments with your credit card could ding your credit score by increasing your credit utilization ratio, or how much of your available credit you’re using.
Car buyers in the U.S. spend an average of $745 on new car payments each month. This could end up accounting for a big chunk of your available credit, depending on your limit.
Recommended: Car Loans With a 650 Credit Score
Other Ways to Pay Car Loan Payments: Refinance Your Car
Another way to pay for your car is to refinance your auto loan. Refinancing may allow you to get a lower interest rate or extend your loan term, which may lower your monthly payment. Keep in mind, though, that extending your term will make it so you pay more money in interest overall.
But just like paying by credit card, there are pros and cons of refinancing your car, including the potential for additional costs due to prepayment penalties. Before you sign on the dotted line, you’ll want to make sure you ask any and all refinancing questions to ensure refinancing actually makes sense for your situation.
The Takeaway
A car is one of the most significant purchases an individual can make, and the costs involved mean it’s a good idea to put some thought into how best to pay back a car loan. Make sure to consider the pros and cons involved if you choose to pay your car payment with a credit card. And if you’re struggling to make your monthly car payments, you could consider refinancing your car.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
Is it smart to use a credit card for car payment?
Using a credit card for a car payment can earn rewards or utilize a 0% introductory APR, but it’s generally unwise due to high interest rates, potential cash-advance fees, and the risk of carrying large balances. Plus, some lenders may not allow it. Only consider it if you can pay off the charge immediately and avoid extra costs.
Do car dealers accept credit cards for payment?
Many car dealers accept credit cards for payments, but some may limit the amount or charge a processing fee. It’s important to check with the dealer beforehand. Using a credit card can offer rewards and build credit, but be cautious of high interest rates.
Can I pay my monthly car payment with a credit card?
While some lenders may allow you to pay your monthly car payment with a credit card, some may charge a processing fee. This can help you earn rewards and build credit, but ensure you can pay the credit card balance in full to avoid interest.
Photo credit: iStock/Eva-Katalin
SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
SOALR-Q325-045