Pros and Cons of Financing a Car Through Credit Cards

So you have a credit card with ample credit limit. You need a car to get you from point A to B. See the connection?

In many ways, buying your dream car using a credit card can be the most significant financial decision you’ll ever make. However, it could also be the worst idea that could pop up in your head. So before proceeding with swiping your card to get that sweet rise at the dealership, best consider the benefits and risk doing so would bring. Check out some of the pros and cons of financing a car through credit cards below if you want to learn more.


They Help You Avoid Paying Interest

Using 0% APR credit cards allows you to finance your dream auto without interest charges. So if you happen to hold that type of credit card, best use it to get a vehicle. Or you can apply for a new credit card before you proceed with the car purchase.

They Let You Score Big Rewards

Some credit cards even offer great perks, bonuses, and rewards when used to borrow substantial amounts of cash. Use these cards to purchase your dream ride to enjoy these benefits, as well as to net yourself some severe cash backs.

They Allow You to Consolidate Your Debt

Another great reason to use your credit cards to finance a car is that it lets you consolidate your debts. Debt consolidation allows you to simplify and even reduce your monthly payments, enabling you to live within your means and retain your comfortable lifestyle.

They Don’t Need Pre-Approval from Banks

You also don’t need to get pre-approval from banks when you opt for credit cards for your car financing needs. The fact that you already hold that plastic card is enough proof that you can borrow a certain amount of funds for your personal expenses.

They Don’t Require Collateral

Lastly, financing a car through credit cards doesn’t require any collateral. In other words, you don’t need to present an asset (e.g., vehicles, land titles, salary advances, etc.) as security payment. All you need to focus on is settling the monthly dues.


They’re Rejected By Some Auto Dealers

Not all car dealers accept credit cards as a mode of payment. Some reject it outright, while others let you use your cards to pay a portion of the vehicle’s price. In any case, you need to find car dealers who will be willing to entertain your credit card.

Their Credit Limit Might Not Be Enough

You can only borrow so much money from a credit card. If your card’s credit limit is lower than your target vehicle’s selling price, you might end up maxing out your card just to meet the down payment. In that case, you might need to seek other financial instruments to help you settle the rest.

They Could Attract Hefty Advance Fees

And if you’re thinking about using credit cards to withdraw cash needed to fund your dream ride, think again! Credit card providers have costly policies when it comes to using their cards to make cash equivalent transactions. You could wind up with advance fees worth 3% of the amount you withdraw if you’re not careful.

They Incur Surcharges

Car dealers who accept credit card payments might also charge you with surcharge fees for their vehicles. Surcharge charges depend on the credit card provider. For example, surcharge fees for Visa and Mastercard products cost around 0.5% to 2% of the total transaction cost.

They May Financially Overwhelm You

Finally, using your credit card to finance your dream auto could leave you with an enormous debt. Failure to pay these dues on time, as well as taking on additional debts, could leave you overwhelmed if you’re not careful.

The Bottom Line

As you can see, a credit card can help you get your dream car, but not without any risks. By seriously weighing the pros and cons of financing a car through credit cards, you’ll be able to make a wise financial choice.