You may be asking whether you make auto payments using a credit card, transfer the full loan amount to a credit card to save interest, or receive cash back in another manner.
Is Using A Credit Card For My Monthly Car Payment An Option?
You can use credit card to make payments on car loan if the lender agrees to accept them. Debit cards, checks, money orders, and direct transfers from checking or savings accounts are some cash-backed payment methods that loan servicers will accept. On the other hand, credit card purchases come with associated fees for the merchant, which is why many loan servicers will only accept payment of cash-backed methods.
You might also pay your lender with a credit card using a third-party payment processing provider; however, this will result in you being charged a transaction fee. You can obtain money from your credit card through a cash advance to complete the payment; however, this option comes with expensive fees and high-interest rates that start immediately.
Is Using A Credit Card An Option For Paying Off The Balance Of My Car Loan?
Using a credit card to pay off an existing car loan must normally be accomplished via the process of a balance transfer. This method includes transferring debt from one location to another to take advantage of a reduced interest rate at the destination. Transferring a balance may be a helpful tool, but if you cannot pay off the amount in a timely manner, it might cause your debt to spiral out of control.
Your credit card issuer will determine whether you can use a credit card to make payments on a car loan. The credit card companies American Express and Chase, for instance, do not let you transfer the balance of a loan, although Citi and Discover allow it. You will need to inquire with your issuer about the policy it maintains.
In most cases, you may start a balance transfer by logging into the online portal provided by your card issuer or by dialing the number shown on the back of your card. You will need the name of the company that services your car loan, the account number, and the total amount you want to transfer. After then, the responsibility is on the card's issuing bank. You can also use balance-transfer checks, which the issuer may have already sent to you.
Keep in mind that even if the company that issues your credit card allows you to transfer balances from other loans, the maximum amount you may move to your credit card is determined by the credit line you have available. There are situations where the sum may even be less than your available credit line. If the credit limit on your card is under $5,000, for instance, you won't be able to transfer a debt of $10,000 on your car loan.
Benefits
You Will Have Lower Overall Interest Costs
For example, the interest rate on your car loan is 3%. You would end up paying an extra $703.92 in interest for a loan of 36 months and a principal amount of $15,000. However, if you transfer the debt from the auto loan to a credit card that has an introductory annual percentage rate (APR) of 0%, you will not have to pay any interest on the amount as long as you pay it off before the end of the 0% promotional period.
You Will Be Able To Get the Title to the Car More Quickly
If you pay off your auto loan balance in full, you will become the sole owner of the vehicle you purchased. That indicates that you have an asset you are free to put to whatever use, including selling it.
Risks
If You Don't Pay Off the Debt In A Timely Manner, You'll Be Subject To A Severe Penalty
The annual percentage rates (APRs) charged by credit card companies are often substantially higher than those charged by car finance companies; some are more than 20%. If you continue to carry the majority of the auto debt on your card after the 0% term on your credit card ends, you may wind up paying considerably more in interest than you would have if you had retained the original auto loan.
There Is Often a Charge Associated With Balance Transfers
A balance transfer fee is typically between 3% and 5% of the amount that is transferred and levied by most credit card companies. If you transfer $10,000 worth of auto debt to a credit card, you could be required to pay a charge ranging from $300 to $500. Depending on how quickly you want to pay off the debt, this might cost you more than the amount of money you'd save on interest.
