I knew I’d finally made it in my career when I had a credit card with a high enough limit that I could purchase a car with it. Of course, just because you can do something doesn’t mean you ought to do it.
The obvious problem with car auto financing with a credit card would be the interest rate. You can usually get a much lower interest rate on an auto financing loan than you can get with your credit card. Unless you have cash on hand enough to immediately pay off the credit card, it’s probably not a good idea to use it to buy a car.
On the other hand, if you have cash to pay for a car and get a points reward or a cash reward for every dollar you use on your credit card, it might seem like an attractive option.
Unfortunately, many dealerships won’t let you put a car on a credit card. There are a number of reasons for this, but usually the dealer has to pay a fee, sometimes as much as 2% of the transaction. This may make the dealer less likely to offer a lower price to begin with.
There’s also the risk, of course, that you’ll be tempted not to pay the entire car off. Then, you’re stuck with a high-rate credit card bill that will almost surely cost you more than if you had financed, and will definitely cost more than if you’d paid cash.
If you are thinking about buying a car with your credit card, make sure you weigh your choice carefully.
