Using a travel credit card to earn rewards for purchases you’d be making anyway is a great way to defray the cost of your next vacation, as long as you pay off your balance in full every month.
It can even make sense to pay an extra fee (using services like Plastiq) to pay rent, mortgage or taxes with a credit card when you’re working toward meeting a card’s minimum spending requirement.
In the past, TPG readers have asked if you can use a credit card to buy a car. The short answer is: Yes, but it’s not exactly that simple. There are a handful of factors to consider before you pull out the plastic to pay for your next ride.
Before you swipe or tap, make sure it’s a good deal because getting a good price on the car is more important than earning rewards for the purchase. However, using credit cards for large purchases is a good way to stack up rewards, so let’s look at when it makes sense to do just that.
Related: The top credit cards to maximize large purchases
Can you buy a car with a credit card?
Before you put a five-figure purchase on your credit card, you’ll want to have the cash available to pay off your card in full. Otherwise, you’ll end up paying an interest rate many times higher than what it would cost to finance the vehicle.
The one exception is opening a card with a 0% annual percentage rate offer. Be sure that the 0% offer applies to new purchases because balance transfers usually incur fees (3% to 5%).
Related: TPG’s 10 commandments of credit card rewards
Can you use a credit card for a car down payment?
Buying a car with a credit card might take some legwork. For example, former TPG contributor Richard Kerr paid for a $40,000 car with The Platinum Card® from American Express, but he haggled with five dealerships before he found one willing to play ball and allow him to use his card for the full purchase price.
Daily Newsletter
Reward your inbox with the TPG Daily newsletter
Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts
However, if you’re charging a smaller amount on your card (to pay for the down payment or a portion of the car), you’ll find more dealers willing to accept that deal.
Related: 9 things you didn’t know you could pay for with a credit card
Why don’t all car dealerships accept credit cards?
Many dealerships are hesitant to accept large credit card payments because of the processing fees (up to 3%) they pay when a card is used.
This is something to keep in mind when you’re working out the purchase price.
Related: Can you pay rent with a credit card? Everything you need to know
How to negotiate using a credit card for a car purchase
One strategy is to negotiate a price you’d be willing to pay for the car before you mention paying with a credit card, which, in turn, might invite another round of negotiations.
I’m more comfortable going for the low-hanging fruit (charging a portion of the payment). It can be worth it to pay some extra fees if you’re going to earn a big introductory bonus that’s worth many times what you’d pay. You might even be able to split a large payment across multiple cards and meet several minimum spending requirements at the same time.
Related: How can I get a higher, targeted credit card introductory bonus?
Best credit cards for buying a car
If you want to keep it simple, you should take advantage of the American Express Auto Purchasing Program. This program connects cardmembers to 7,000 dealers who are willing to accept an American Express card for at least $2,000 of the purchase price. It’s a good choice if you don’t want to bother with haggling at the dealership.
Once you have your dream car in sight, you’ll want to get the most bang for your buck. Usually, that means making the purchase on a newly opened card so you can earn its introductory bonus offer.
But if you haven’t recently been approved for a new card or two, then use a card that either earns bonus points for the purchase or has valuable ongoing rewards for meeting spending requirements.
If you want to earn the most value for your purchase, you should earn transferable points, such as American Express Membership Rewards points or Chase Ultimate Rewards points. For instance, The Blue Business® Plus Credit Card from American Express earns 2 points per dollar spent on the first $50,000 in purchases each calendar year, then 1 point per dollar thereafter.
It’s a solid choice, but The Business Platinum Card® from American Express currently offers a welcome bonus of 150,000 Membership Rewards points after you spend $20,000 on eligible purchases within the first three months of card membership. A large purchase is a great way to earn the welcome bonus. The Business Platinum Card also earns 1.5 points per dollar spent on eligible U.S. purchases of $5,000 or more (on up to 2 million bonus points per calendar year).
With the Chase Freedom Unlimited® or the Ink Business Unlimited® Credit Card, you earn an unlimited 1.5% cash back on purchases. Although these cards are technically cash-back credit cards, the cash back can be earned as Chase Ultimate Rewards points, meaning they can be redeemed for various rewards at a rate of 1 cent each.
However, if you move your points from either of the Chase Unlimited cards to the Chase Sapphire Preferred® Card, the Chase Sapphire Reserve® or the Ink Business Preferred® Credit Card, they can be transferred to Chase’s 11 airline and three hotel partners.
The other option for maximizing your purchase is to use a card that will earn you valuable perks for hitting spending thresholds. If you’re trying to earn Delta Air Lines elite status, the Delta SkyMiles® Platinum American Express Card and the Delta SkyMiles® Reserve American Express Card both earn Medallion Qualification Dollars toward status when you spend with the cards.
Related: How to choose the best credit card for you
Is buying a car with a credit card worth it?
Buying a car with a credit card can be an excellent opportunity to earn tons of bonus points or hit spending thresholds that unlock rewards, such as free night awards.
But not every dealer will accept credit cards, and those who do will charge you more to cover their card processing fees.
Related: Why nearly every purchase should be on a credit card
Bottom line
Getting the best deal and earning rewards at the same time can take a good amount of negotiating.
If haggling for a car isn’t your thing, make it easy on yourself by taking advantage of Amex’s Auto Purchasing Program. The program connects American Express cardholders to 7,000 dealers who allow customers to put at least $2,000 of their car purchase on their Amex card.
Some of these dealers will even agree to put the entire purchase price on your card, but again, it’s likely they will add the extra card fees to the final price. But paying a bit extra in fees can be worth it if you’re earning rewards that are worth much more than the fees.