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Buying a car with your credit card

Thinking about how to pay for a new car? Weigh up the pros and cons of paying with plastic before you decide.

A car probably isn’t at the top of your list of things to purchase with a credit card. But it could be tempting to pay with plastic as a way to rack up more points on a rewards card, or convenient if you don’t want to apply for yet another loan.

Whatever your reasons for considering a credit card for car finance, there are several important factors and limitations to consider. This guide will outline what you need to know about using your credit card to buy a car, and offer some other options so you can find a payment method that suits your circumstances and needs.

HSBC Platinum Qantas Credit Card

HSBC Credit Card Offer

Offers complimentary international travel insurance cover, a promotional balance transfer rate plus 60,000 bonus Qantas Points for new cardholders who meet the spend criteria.

  • $199 p.a.
  • 19.99% p.a. on purchases
  • Cash Advance Rate of 21.99% p.a.
  • Up to 55 days interest free
  • Minimum Income Requirement of $40,000 p.a.

Credit Cards with a High Credit Limit for buying cars

Rates last updated July 25th, 2017
Name Product Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee Product Description
HSBC Platinum Qantas Credit Card
19.99% p.a.
$199 p.a.
Receive 60,000 bonus Qantas Points when you meet the spend requirement and earn up to 1 Qantas Point per $1 spent.
Citi Qantas Signature Credit Card
20.99% p.a.
0% p.a. for 6 months
$199 p.a. annual fee for the first year ($395 p.a. thereafter)
Earn from 0.5 Qantas Points per $1 spent on selected purchases and get a 2 airport lounge visits per year.
Virgin Australia Velocity Flyer Card - Exclusive Offer
20.74% p.a.
0% p.a. for 18 months
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
Apply by 31 July 2017 to earn bonus Velocity Points for the first three months and a $129 Virgin Australia Gift Voucher each year.
Qantas American Express Discovery Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$0 p.a.
Earn Qantas points that can be redeemed for a one way, return or multi-destination Classic Flight Reward on over 50 partner airlines.
Virgin Australia Velocity Flyer Card - 0% Interest Offer
0% p.a. for 12 months (reverts to 20.74% p.a.)
0% p.a. for 6 months
$129 p.a.
Save with 0% p.a. on purchases for 12 months. Plus, up to 0.66 Velocity Points per $1 spent.
Emirates Citi World Mastercard
20.99% p.a.
0% p.a. for 9 months
$149 p.a. annual fee for the first year ($299 p.a. thereafter)
Earn up to 1.5 Skywards Miles for every $1 spent and indulge in carefully curated local and global experiences.
Westpac Low Rate Card - Online Only Balance Transfer Offer
13.49% p.a.
0% p.a. for 24 months with 2% balance transfer fee
$59 p.a.
Take advantage of 0% p.a. for 24 months on balance transfers with a 2% BT fee. Plus, the convenience of the Westpac mobile banking app.
American Express Velocity Platinum Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$375 p.a.
Receive a complimentary Virgin Australia return Economy domestic flight each anniversary year and complimentary travel insurance.
Citi Rewards Signature Credit Card
20.99% p.a.
0% p.a. for 6 months
$199 p.a. annual fee for the first year ($395 p.a. thereafter)
Earn from 1 Point per $1 spent on selected purchases and receive a complimentary Priority Pass membership with two airport lounge visits per year.
Citi Clear Platinum
14.99% p.a.
$99 p.a.
Save with 14.99% p.a. on retail purchases. Also enjoy free wine when you dine with the Citibank Dining Program.
Qantas American Express Premium Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$249 p.a.
Enjoy two complimentary Qantas Club lounge invitations per year, plus the protection of complimentary travel and purchase insurance.
Virgin Australia Velocity High Flyer Card - 30k Bonus Points offer
20.74% p.a.
1.9% p.a. for 15 months
$144 p.a. annual fee for the first year ($289 p.a. thereafter)
Take off sooner with up to 1 Velocity Point per $1 spent and earn up to 30,000 bonus Velocity Points. Plus, complimentary travel insurance.
ANZ Platinum Credit Card - Exclusive Offer
0% p.a. for 3 months (reverts to 19.74% p.a.)
0% p.a. for 12 months
$0 p.a. annual fee for the first year ($87 p.a. thereafter)
Receive a low introductory offer of 0% p.a. on purchases for 3 months and 0% p.a. on balance transfers for 12 months.
Bank of Melbourne Vertigo Visa Credit Card
13.24% p.a.
0% p.a. for 14 months
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Receive up to 55 days interest-free on purchases and the protection of Verified by Visa online purchases.
Bank of Melbourne Amplify Signature
19.49% p.a.
$279 p.a.
Earn up to 3 Amplify Rewards Points per $1 spent and receive an additional card at no extra cost.
Bank of Melbourne Vertigo Platinum
12.74% p.a.
0% p.a. for 20 months
$99 p.a.
Get a range of complimentary insurance covers, access to a 24/7 concierge and up to 55 days interest-free on purchases.
St.George Vertigo Platinum
12.74% p.a.
0% p.a. for 20 months
$99 p.a.
Offers complimentary travel insurance, complimentary purchase insurance and access to a 24/7 personal concierge service.
St.George Amplify Signature
19.49% p.a.
$279 p.a.
Earn up to 3 Amplify Rewards Points per $1 spent and receive two complimentary airport lounge passes per year.
BankSA Vertigo Platinum
12.74% p.a.
0% p.a. for 18 months
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Take advantage of purchase protection, extended warranty and overseas travel insurance, plus a 24/7 concierge.
Citi Rewards Platinum Credit Card
20.99% p.a.
0% p.a. for 24 months with 1.5% balance transfer fee
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
Earn Reward Points per $1 spent as part of the Citi Rewards Program, plus receive complimentary international travel insurance.

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Why would you buy a car with your credit card?

There are several reasons why you might wish to buy a car with your credit card. These circumstances include:

  • Difficulty getting a car loan. Your current financial circumstances might not be ideal for applying for a new loan. For example, it can be harder to get approval if you’re between jobs or have a lot of existing debt. You may be able to avoid the hassles of applying for a new loan if you have a credit card with a high enough credit limit.
  • Promotional interest rates. Perhaps your brand new 0% purchase credit card offers 15 months of interest-free purchasing power on it, which seems much more competitive than the standard rates offered with a conventional car loan. If you manage payments well, it could even allow you to avoid paying any interest on your credit card.
  • Split costs. If you have some cash stashed away for the new wheels, but are just a little bit short, your credit card could help cover the difference.
  • Immediacy. If your current car is broken down or you’ve seen a great deal that’s only available for a limited time, a card could allow you to get the car you want straight away.
  • Rewards. This is another popular reason for using a credit card at the car dealer. If you have a frequent flyer credit card that offers 1 point per $1, for example, you could earn a free flight by paying for your car. This can be highly rewarding, as long as you don’t end up paying interest fees exceeding the value of your reward or points earned.

What you should consider before buying a car with your credit card

While there can be benefits to paying for a car with your credit card, here’s what you need to weigh up before pulling out the plastic:

  • How much will the car cost? It’s usually only viable to use a card for lower-cost, used cars. Most car loan options start at around $5,000, so if the car you want is less than this then your finance options may be narrowed down to a credit card, personal loan or savings.
  • What’s my credit limit? Naturally, you will only be able to charge any purchase on your credit card up to its credit limit. You could also consider asking for a credit limit raise if your credit score is healthy, or charging the car to several credit cards.
  • How much can I afford to regularly put towards the debt? Draw out a repayment plan before you commit to making a large purchase like this. Carrying a large balance on your credit card should generally be avoided. If you’re taking advantage of a 0% or a very low purchase interest rate, calculate how you can pay it off before you promotional period ends and consider what standard interest rate will apply if you have a balance remaining. Some 0% purchase options last between 3 to 15 months, so if it's going to take over a year to pay off, a car loan will probably be a less expensive option.
  • Will there be a surcharge? Some sellers could apply a surcharge to your credit card payment, typically between 1.5% and 3% of your transaction value (or more depending on your card type). To put this into perspective, a 3% surcharge would cost $300 on a $10,000 purchase. Note that car loans also involve a flat application fee between $120 and $378, albeit for larger loan amounts.
  • Should I let my credit card provider know? Sometimes large transactions on your credit card account could be flagged by fraud monitoring services. If you’re concerned about this, you can contact your credit card provider ahead of time to let them know it is a planned purchase.
  • How will this affect my cash flow? If you plan to use most or all of your available credit on the car, then any direct debits or other regular payments may no longer be possible on your credit card. Also note that you may not enjoy interest-free days on new purchases while carrying an outstanding balance on your credit card.

Other financing options for buying a car

Apart from using your credit card, you may also want to consider the following options:

  • Car loans. In general, car loans offer more affordable interest rates than credit cards over longer periods of time. You can easily find loans offering interest rates below 10% over 1-7 year loan terms, which may have a lower impact on your cash flow and interest expenses over time.
  • Personal loans. You may also wish to look into personal loans, which typically offer more competitive standard interest rates than your credit card. Personal loans can be secured or unsecured, and will also likely have a lower impact on your finances over time than a credit card debt.
  • Savings. If you can wait for it, the best thing to do would be to pay for your dream car in cold, hard cash. Of course, you could still choose to pay with your rewards credit card to earn rewards, but the point is to avoid paying any interest fees whatsoever on your new set of wheels. Consider earning interest on your hard-earned money instead with a savings account.

Buying a car with a credit card vs. a personal loan

Jonathan is looking at buying a used car for $6,000. He’s considering the following financing options for his purchase:

ProductInterest rateTermMonthly repaymentsSurcharge/ Loan application feeTotal cost
Car loan10% p.a.2 years$277$195$6,840
Credit card13% p.a.N/A but planned for repayments over 2 years$282$180 (3%)$6,953

Based on a two-year repayment period, paying for his new car with a credit card costs only $113 more than the car loan option. Jonathan decides to use his credit card because his credit limit is $10,000 and this purchase will not drastically affect his cash flow. Also, since he has a frequent flyer credit card that offers 1 point per $1 spent, he will earn 6,000 points for this purchase that could help offset the cost of financing.

Paying for a car with your credit card may or may not be the wise thing to do – it really depends on your circumstances. When weighing up your options, remember that interest fees can snowball over time and you should try as much as possible to avoid getting caught in the debt trap. It may sometimes be better to defer gratification than to end up paying way too much for a car because of interest fees and surcharges.

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