Can I Pay My Car Payment With a Credit Card? [Pros and Cons]

When considering the best ways to maximize your earnings on your credit cards, you might think about what you spend the most on each month. For example, rent, groceries, or utility bills might come to mind. But what about your car payment?

You can usually find ways to use your credit card to pay for your car payment, but when you factor in all the fees, it might not be worth it. We’ll let you know how to make your car payment using your credit card, the cost of doing so, and break down whether it might make sense.

Can I Pay a Car Payment With a Credit Card?

If you’re hoping to earn some cash-back, maximize your credit card rewards, or are simply looking for a way to lower your interest rate, you might want to use your credit card to make your monthly car payments. Here are a few things to consider.

Does Your Lender Accept Credit Card Payments?

Most lenders don’t accept payments directly from your credit card. This is due to the high processing fees charged by the credit card companies. Most only allow cash-based payments (like those from your checking or savings account).

It’s worth asking your lender about it, though, as some may allow credit card payments. It’s important to ask if there are any fees you have to pay to use a credit card for your car payment, which could increase the price of your monthly loan payments.

What if Your Lender Doesn’t Accept Credit Card Payments?

A few workarounds exist to using your credit card if your lender doesn’t accept credit card payments for car loans, but they all come with a fee.

Mobile Payment Service

If your lender allows mobile payments, you could use a third-party processor, such as Venmo, Plastiq, or PayPal. You could pay through the app using your credit card, and the app would then pay your lender. This would allow you to use your credit card to make your car payment, with a fee to the processor. Venmo charges 3%, for example.

Cash Advance

When a credit card isn’t accepted, convenience checks are an option you can request from your card issuer. This convenience check is considered a cash advance and is subject to all the associated fees typical for a cash advance.

You could also take out money from an ATM using your credit card to pay your auto loan. This is also a cash advance, so expect huge fees and interest. Also, you’ll need a PIN to get cash at the ATM using your credit card.

Money Transfer Service

Companies such as Western Union or MoneyGram allow you to pay participating retailers/lenders, and you can use your credit card to make these payments. The service costs a fee (Western Union charges between $3 to $20, depending on the dollar amount), in addition to the potential cash advance charges.

Make the Minimum Payment

We don’t necessarily recommend it, but it is possible to stretch out the repayment of your loan by paying with a credit card and only making the minimum payment on your card.

For example, if your car payment is $500, but you make the payment using your card, you may only be required to pay a portion (around $25, but exact amounts will depend on your issuer).

While this gives you more time to pay off your loan, it also comes at the expense of some pretty large interest fees. However, it could be a good way to get a breather on your loan if you’re stretched too thin.

Can I Pay a Car Loan With a Credit Card?

The options above are primarily suitable for making monthly car payments using your credit card. But what if you want to transfer the entire loan to a credit card to get a better interest rate or more time to repay your loan? In addition to the items listed above, a balance transfer is another option.

Balance Transfer

Many card issuers allow you to transfer an auto loan balance to a credit card, including Bank of America, Barclaycard, Capital One, Citi, Discover, PenFed, Truist, USAA, U.S. Bank, Wells Fargo. Lenders will charge a one-time “transfer fee,” generally between 3% to 5% of the amount transferred.

Combined with the fact that many cards offer an introductory 0% interest rate, there is the potential to save you money on your car’s APR, but only if you can pay your balance off in total during this introductory period. If you still owe a balance at the end of this introductory period, your card’s APR will probably be much higher than your original auto loan’s APR.

Benefits of Paying Your Car Payment or Loan with a Credit Card

There are a few benefits to paying your car payment with a credit card. But be sure to weigh these against the risks carefully.

Earn Points and Rewards

You could earn cash-back, travel rewards, and more by paying off your car loan using your credit card. Depending on which card you’re using to pay off your car loan, these can have a lot of value.

Just be sure the value of these points and rewards exceeds the additional fees you’ll pay to use your credit card.

Interest Fee Savings

If you transfer your loan to a card with a 0% introductory APR (or a card with a lower APR than the APR on your car loan), you can save on some significant interest fees. While you must pay a transfer fee, the rest of your loan could be financed for free!

Be sure you know the details of the introductory APR and the card’s APR if you don’t repay the loan in time.

Risks of Paying Your Car Payment or Loan With a Credit Card

There are some clear drawbacks to using a credit card to pay off your car payment.

Potential for Overspending

Any time you’re not paying off your balance in full each month, you risk your debt snowballing out of control. This can happen easily due to the compounding interest and loss of a grace period.

Avoid paying off your car payment with your credit card unless you can be sure you’ll be able to pay it off each month.

Credit Score Risk

When considering revolving debt, your credit utilization comes into play. If you exceed 30%, your credit score could drop. So if making your car payment on a credit card causes you to hit 30% or more of your credit limit, this could also lower your credit score.

If you convert a car loan to a credit card, you’ll change to a more risky debt, potentially lowering your credit score. Lenders tend to look more favorably on installment loans, such as car loans, than revolving debt, such as credit cards. Secured installment loans are usually considered “good debt” and can increase your credit score.

Final Thoughts

Should you use your credit card to make car payments? Generally, we would advise against it. There might be a few situations where it might be worth it to you to do so — for example, if you’re close to an amazing reward redemption, or you get a great balance transfer offer.

For the most part, paying your car with your credit card can get you in some sticky financial situations, some with some large fees, and should be avoided when possible. The benefits generally don’t outweigh the risks.