Is It a Good Idea to Use a Credit Card to Buy a Car?

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Using a credit card to buy a car may seem to go against conventional financial wisdom, but it is possible to do. As with any financial transaction, there are benefits to doing so as well as reasons not to do it. Being aware of the conditions is important before deciding if this is the right move to make.

Pros of using a credit card to buy a car

While there are many warnings against abusing credit cards, there can be some advantages to using one to buy a car. It might be more helpful to use one of the checks supplied by the creditor instead of trying to use an actual card.

Possible savings – Many cards have an introductory offer of zero percent interest on purchases for a certain time period. If that card is used, the money that would have been used to buy the car can be invested in a bank certificate of deposit and then applied toward the car later, almost certainly turning a profit.

Type of loan – A credit card loan is a type that is called unsecured. Though this may sound negative, in fact it means the car is owned outright and if payments cannot be made, there is no bank to show up and repossess it.

Flexible payments – When using long-term financing to pay for a car, the monthly installments are fixed and non-negotiable later. While there will be a minimum monthly amount due on the credit card, it is not necessary to pay more than that amount. If funds become short one month, a smaller amount can be paid toward the car.

Instant approval – As long as the credit card’s limit has not be exceeded, there is no need to wait for a loan approval. This also means there are no loan forms to fill out prior to the deal.

Cons of using a credit card to buy a car

Using a credit card to purchase a vehicle does have some risks that certainly should be considered.

Longer payments – While using a credit card to finance a vehicle purchase can make the monthly payments more flexible, this often will also extend the time period for which the money will be owed. If the card is not zero, or at least low, percent, this will result in more money being paid than if a traditional loan was used.

Credit rating – Making such a large purchase on a credit card, especially a first one, can wreak havoc on a consumer’s credit rating. Agencies that determine credit scores look at how much is owed compared to the credit limit. Having too much debt can lower scores.

A credit card may be a little-used option for buying a car, but under the right circumstances it can work. For those wanting instant approval or flexible payments, using a credit card may outweigh the risks of paying more money for the car or lowering a credit score.

Melanie Lewis writes for a site that provides tips on financing a car and has a useful tool to calculate monthly repayments.


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