Although it's not common, some lenders may let you make car payments with a credit card, but it could be a costly move that may damage your credit score. If you use a 0% intro APR credit card, you could pay off your car loan with no interest, but watch out for high fees, and make sure not to fall behind on payments.
An auto loan is a type of installment loan, like most student loans, mortgage loans, and personal loans. As long as you make the monthly payment by the due date every month, a car loan should help your credit score over time.
What is autopay? Automatic payments or “autopay” is a feature offered by most credit card issuers that allows you to have your balance or minimum payment automatically paid from a bank account when your statement is posted. You can set up autopay with your credit card issuer over the phone or online.
The interest rate you'll have to pay back on a credit card may be far higher than the interest rates that you'd have to pay for a loan. You're better off using other financing options such as cash, an auto loan, or trading in a car for a down payment if you're looking for financially responsible ways to buy a car.
Can You Pay a Monthly Car Payment with a Credit Card? Like we said, the simple answer is yes, it's possible to use a credit card for your monthly car payment, but not really advisable.
Cashier's Check
The biggest difference between that and a personal check is that the bank is insuring that the money's covered. For obvious reasons, car dealerships prefer a cashier's check to a personal one. If this is your preferred route, you'll need to visit the bank and may even have to pay a small fee to get it.
Paying bills with a credit card might help your credit score if: It helps you pay on time. If you struggle to remember payment due dates, setting up automatic payments with a credit card can help prevent missed payments without worrying about insufficient funds in your checking account.
Utilities and Other Variable Expenses
Therefore, it's generally safer not to set utility bills on autopilot. “Bills that fluctuate aren't good fits for autopay, such as your electric or water bill,” said Bethany Hickey, banking and lending expert at Finder.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
In addition, when you pay off a car loan, your credit mix changes because you now have one less account in your name. This change can lead to a drop in your credit score.
You could save interest and free up room in your budget by paying your auto loan off early. There are several options available — including refinancing, paying biweekly and rounding up payments, just to name a few. Confirm your lender doesn't charge a prepayment penalty since the cost could be more than what you save.
Although making on-time monthly payments will eventually lead to a higher credit score, most car buyers will first experience a temporary reduction in their credit score. In short, buying a car can be a good way to build your credit score over the life of the loan, but it's more of a long-term credit building strategy.
Depending on the type of bill and the merchant, you may be able to use a credit card to pay bills. Mortgages, rent and car loans typically can't be paid with a credit card. If you pay some bills, like utility bills, with a credit card, you may need to pay a convenience fee.
Auto loans
Most card issuers allow you to transfer auto loan debt, too. As an extra benefit, when you transfer auto loan debt to a balance transfer credit card, you'll officially be paying off the lender servicing that loan. This means you'll get the title of your car earlier than you otherwise would have.
Payment methods to avoid
While every type of payment method has some disadvantages, using cash is one of the riskiest forms of payment as there are no purchase protections if someone scams you out of your cash or otherwise steals it from you. It's also difficult to track down if it's lost or stolen.
Set it up as online bill pay through either your bank or credit card. Do not use automated debit transactions OR open and use a new checking account (separate from your primary checking account) for automatic payments. Set up alerts in advance of your bill due dates to make sure you have money to cover the bills.
Cons of Automatic Payments
Your biller could accidentally withdraw the wrong amount or double-charge you. It could even fail to withdraw the money at all. Sometimes, companies continue to withdraw money even after you've canceled services.
If your car loan lender allows it, you can make a car payment with a credit card. However, credit card purchases impose fees on the merchant, so many loan servicers accept only cash-backed payment methods, like a debit card, check, money order or a direct transfer from a checking or savings account.
Generally speaking, paying your monthly bills by credit card can be a good idea as long as you're able to adhere to two rules. Always pay your statement balance in full and on time each month. Avoid putting bills on a credit card because you can't afford to pay them with cash.
Automatic payments could help your credit score, but only if you time the payment to happen before the credit card's statement due date and around the same time you know there will be enough money into your bank account. Making even one late payment could ultimately hurt your credit score.
In general, you should strive to make a down payment of at least 20% of a new car's purchase price. For used cars, try for at least 10% down. If you can't afford the recommended amount, put down as much as you can without draining your savings or emergency funds.
It's good practice to make a down payment of at least 20% on a new car (10% for used). A larger down payment can also help you nab a better interest rate. But how much a down payment should be for a car isn't black and white. If you can't afford 10% or 20%, the best down payment is the one you can afford.
How much should you put down on a car? A down payment between 10 to 20 percent of the vehicle price is the general recommendation.