While some lenders will allow you to make a car payment via credit card, most discourage the practice by charging convenience fees to offset the additional charges they face for processing such payments. A little creative financial maneuvering can help you find other ways to use credit to pay for car payments, but they require careful consideration. The practice can be time-consuming, pricey and end up costing you more in the long run.
When possible, try to avoid making car payments using your credit card. Although credit use may be an option, it will often lead to interest payments both on the car loan and the credit card debt itself.
Why Pay for Credit Using Credit?
If you use a credit card to make a car payment, you're essentially paying interest on top of interest. The institution financing your vehicle is charging you interest, and the credit card company is charging it as well. In the big picture, this doesn't make for smart financial planning. Of course, it's not always a lack of funds that encourages this approach to big-ticket bill-paying. A practice known as "manufactured spending" is a type of shell game in which consumers regularly pay for one form of credit with another, often flipping between better interest rates, and in the process, accumulating "points" or other rewards from credit card companies that can offer cash back or massive discounts on travel and other expenditures.
Getting Out of a Jam
If you find yourself in dire financial circumstances and are unable to make a car payment, you may justify the approach of paying by credit card as a means to meet your debt obligation and forgo the risk of repossession or a negative mark on your credit. In this instance, you may be able to negotiate some breathing room.
Ask your lender to waive a payment for a month, adding the missed payment on to the end of your loan. Request permission from a lender to make a credit card payment – even if it's not a standard practice, they may allow it in special circumstances – but be prepared to pay a fee for the privilege. Take a cash advance from your credit card and deposit it into your bank account, where you can then make your car payment in your typical manner, whether by check, online or direct withdrawal.
If you have a line of credit attached to your checking account, you may be able to make a car payment through your bank as you normally would by tapping into your credit line to cover costs.
Avoiding a Credit Crisis
Credit cards are convenient methods for paying for just about anything. Keep in mind, however, that if you're using this method to keep your head above water and you end up having your car repossessed, you'll still have to pay your credit card debt that includes the charged vehicle payments. You'll also end up paying significantly more for your vehicle over the life of the loan. A better approach is to live within your budget and create a savings account to access in the event of unexpected financial need. If you fall behind on a large payment, such as a car, keep in touch with your lender. A nonprofit credit counseling service also can help you manage finances if the need arises.
Lisa McQuerrey has been an award-winning writer and author for more than 25 years. She specializes in business, finance, workplace/career and education. Publications she’s written for include Southwest Exchange and InBusiness Las Vegas.