When it comes to purchasing a car, various payment options are available, and one intriguing possibility is using a credit card. However, before making such a significant financial decision, it’s crucial to understand the potential advantages and drawbacks.
This article will explore whether buying a car with a credit card is a smart move, considering factors like rewards, interest rates, credit implications, and dealer acceptance. By the end, you’ll be equipped with the knowledge to make an informed choice that aligns with your financial goals.
Of course, while there may be good – or at least, acceptable – reasons behind deciding to use a credit card to buy a car, there are some very important factors to take into consideration before you buy.
Your credit limit will determine your spending power, so you will need to take into account your available spending limit – and whether that will allow you to buy the car you want. You may be able to extend your credit limit by making a request to your card provider, but bear in mind this will usually involve a credit check.
Whether your credit limit is big or small, you need to make sure the purchase of your car will not sink you in unmanageable debt. Only spend as much as you know you can pay off, while paying the minimum in interest and fees. Remember, credit cards are a high interest product, so if you carry a balance long term, those interest charges will quickly stack up.
Before you buy, you will also need to find out whether the seller accepts credit card payments. If you are buying through a private seller, it’s unlikely you will be able to pay using a credit card. Dealers may accept credit card payments, but be sure to check if there will be any fees or surcharges applied.
If, after all that, you believe that using a credit card is doable, here are some tips to make it work.
Some card providers flag large transactions as potentially fraudulent, putting a hold on the purchase until the cardholder can be contacted. To prevent this from happening to you, advise your bank of the transaction beforehand.
As we mentioned before, putting large purchases such as this onto a credit card means putting some serious consideration into affordability. Don’t get carried away with spending up to your available credit limit just because you can. Only buy what you can afford to pay back.
If your credit is good, you may be able to apply for a credit card with a 0% purchase offer. Using an offer such as this could allow you to purchase the car, and then pay it off within the introductory period, with no interest to pay.
TIP: It’s best if you don’t count on making a purchase and then transferring the balance to a balance transfer card. If you find yourself ineligible for the card, you will be stuck paying off the balance on a high interest card.
To ensure you pay off the purchase as quickly as possible, first work out a budget that allows you to cut back where needed, and then create a repayment plan to clear the debt.
Just as there are many reasons to say yes to paying with a card, there are also plenty of reasons to say no.
Automotive Finance is an Australian company that can help guide you through your car loan process. Our team of brokers are experts in the field and can provide you with tailored advice to help you secure the best loan for your needs. Get started with us today!