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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.

Credit Cards with a High Credit Limit for buying cars

Rates last updated December 12th, 2017
Name Product Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee Product Description
NAB Premium Card - Exclusive Offer
19.74% p.a.
0% p.a. for 25 months
$90 p.a.
Exclusive to finder.com.au, enjoy a no BT fee, 0% balance transfer offer for 25 months and seven complimentary insurance covers.
St.George Vertigo Platinum - Online Offer
12.74% p.a.
0% p.a. for 24 months
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Platinum card benefits plus 0% p.a. for 24 months on balance transfers (with no BT fee) and $0 annual fee in the first year. Ends 13 December 2017.
HSBC Platinum Qantas Credit Card
19.99% p.a.
0% p.a. for 12 months
$199 p.a.
Receive 60,000 bonus Qantas Points when you spend $3,000 within 3 months of card approval, plus enjoy a complimentary travel insurance.
Virgin Money Low Rate Credit Card
11.99% p.a.
0% p.a. for 14 months
$49 p.a.
Receive a discounted annual fee, $100 cashback when you meet the spend requirement and up to 14 months interest-free on balance transfers.
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 2 airport lounge visits per year. Plus, a discounted first year annual fee.
Qantas American Express Discovery Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$0 p.a.
Earn uncapped Qantas Points on purchases, pay $0 annual fee for life and take advantage of a 0% p.a. for 12 months balance transfer offer.
Virgin Australia Velocity Flyer Card - 0% Interest Offer
0% p.a. for 14 months (reverts to 20.74% p.a.)
0% p.a. for 6 months
$129 p.a.
Save with 0% p.a. on purchases for 14 months and 0% p.a. on balance transfers for 6 months. Plus, earn 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 curated local and global experiences, plus a discounted annual fee in the first year.
American Express Velocity Platinum Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$375 p.a.
Receive 50,000 bonus Velocity Points, a complimentary Virgin Australia return Economy domestic flight each anniversary year, plus, 2 lounge passes.
Citi Signature Credit Card
20.99% p.a.
0% p.a. for 15 months with 1% balance transfer fee
$199 p.a. annual fee for the first year ($395 p.a. thereafter)
Earn 1 Point per $1 spent on selected purchases plus receive a complimentary Priority Pass membership and two airport lounge visits per year.
Bankwest Breeze Platinum Mastercard
12.99% p.a.
0% p.a. for 24 months with 2% balance transfer fee
$99 p.a.
Receive a 0% p.a. interest rate on balance transfers for 24 months, complimentary travel insurance and 0% foreign transaction fees.
Bankwest More Platinum Mastercard
19.99% p.a.
0% p.a. for 6 months with 1% balance transfer fee
$160 p.a.
Earn 2 More Rewards Points per $1 spent, 75,000 bonus points when you meet the spend requirement and save with 0% foreign transaction fees.
Citi Clear Platinum
14.99% p.a.
$99 p.a.
Receive complimentary insurance covers 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 30,000 bonus Qantas Points, 2 complimentary Qantas Club lounge invitations per year and the protection of complimentary insurance covers.
Virgin Australia Velocity High Flyer Card - 80k Bonus Points offer
20.74% p.a.
0% p.a. for 15 months
$289 p.a.
Take off sooner with up to 80,000 bonus Velocity Points and earn up to 1 Velocity Point per $1 spent. 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)
Exclusive to finder, get 0% p.a. interest on purchases for 3 months and 0% p.a. on balance transfers for 12 months. Ends 17 December 2017.
Bank of Melbourne Vertigo Visa Credit Card
13.24% p.a.
0% p.a. for 18 months with 1% balance transfer fee
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Save with a $0 first year annual fee and a 0% p.a. for 18 months balance transfer offer. Plus, up to 55 days interest-free on purchases.
Bank of Melbourne Amplify Signature
19.49% p.a.
$279 p.a.
Receive 90,000 bonus Amplify or Qantas Points when you spend $5,000 within 90 days and earn up to 1.50 Amplify points per $1 spent.
Bank of Melbourne Vertigo Platinum
12.74% p.a.
0% p.a. for 24 months with 1% balance transfer fee
$99 p.a.
Offers a long-term balance transfer, low ongoing purchase rate, complimentary travel insurance and access to a 24/7 personal concierge service.
St.George Amplify Signature
19.49% p.a.
$279 p.a.
Receive 90,000 bonus Amplify or Qantas Points when you spend $5,000 within 90 days and earn up to 1.50 Amplify points per $1 spent.

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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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