Our world is one made up of money and credit. We use the money we earn to buy things we need in life and, when that money isn’t enough, we get credit from others in order to survive.
A lot of things can be bought on credit and a lot of the time, we spend the rest of the month agonizing over whether we can pay back the loan.
Food, drinks, clothes, bags, shoes, books, and so on, a lot of things can be put on a credit card.
But what about big purchases? If I were to try to purchase a car, but couldn’t afford the full amount at that moment, could I pay the rest through my credit card and overdraft?
In this article, we seek to answer these questions and tell you whether you can buy a car with a credit card.
Table of contents
What Is A Credit Card?
A credit card is an instrument used by people who want to borrow money from financial institutions or other individuals.
It is basically like a debit card, but it has some extra features which enable you to make payments without having to carry cash around.
You would normally have your own bank account with your own money in it to spend. Once the money runs out, then you can’t buy anything else.
This is how debit cards work. For credit cards, everything is exactly the same, but you can purchase beyond the money you have in the account.
This money is loaned from the bank, and you are expected to pay it back within a fixed amount of time.
This means that credit cards will act as a sort of revolving line of credit, that you can continuously dip into when you need extra funds.
When you are paying for something using a credit card, you use the funds in your personal bank account to cover the cost of the item.
The difference between what you owe and what you’ve paid off is called the balance.
This balance can go down if you don’t repay all of your debts, but it can also increase if you do not pay back any of your outstanding debt.
How Does It Work?
To understand how a credit card works, let’s take an example. Say you were going out shopping and needed to buy a new pair of jeans.
To purchase the items, you’d first need to find somewhere that sells them. Then you would need to hand over cash to the shopkeeper to pay for the goods.
As soon as you leave the store, however, you’ll realize that you only have £10 left in your pocket.
Now you’re faced with a dilemma because you cannot continue your shopping trip.
It’s possible that you could return to the bank and get more cash, but you may not have enough in your account.
So, given the circumstances, you decide to open up your wallet and take out your credit card.
You can purchase the products you need on credit and once you’ve done this, you can start making your payment towards the purchase you made earlier.
Your credit card company will send the money directly into your bank account to fund the purchase.
Once the money is received in your bank account, it will automatically go onto your statement.
At the end of the month (usually), the company will either take, ask, or demand (if you have not paid them before) for their money back.
At this point, you pay back the credit, your balance is reset, and everyone is happy.
Is It Safe?
Credit cards are very secure instruments. They typically come with special anti-theft technology, which makes it difficult for someone else to withdraw money from your account.
However, sometimes mistakes happen and fraudsters can steal your information.
Therefore, it’s important that you keep your details updated and regularly check your statements.
Remember, even though it might seem like you can buy anything with a credit card, there are certain restrictions and limits when it comes to spending.
For instance, most banks won’t allow you to spend more than a specified amount on one transaction.
Can You Buy A Car With A Credit Card?
Yes, you can! Most major banks offer credit cards that give you access to finance vehicles, but remember, the interest rate charged by these companies varies depending on the type of vehicle purchased.
There are also some credit cards available that are designed specifically for car purchases.
These include: Bank of America, Citibank, Chase, Discover, Capital One, American Express.
The best thing about buying a car with a credit or debit card is that you don’t have to worry about getting pre-approved for cash loans.
However, you should be aware that many lenders charge higher interest rates on credit cards compared to those who provide short term loans.
This means that if you want to avoid paying expensive monthly fees, then you should consider applying for a loan instead.
Is It Worth Buying A Car With A Credit Card?
The answer is yes. If you have a good credit score, then you can enjoy lower interest rates and better terms.
Also, since the majority of people use credit cards to make payments, they tend to pay off their balances within the agreed time frame.
This means that in most cases, the car will still be yours at the end of the contract period.
In addition, if you choose a reputable dealer, you can trust that your vehicle is in good condition.
In fact, many dealers will offer a warranty service where they cover any defects during the initial six months of ownership.
So, if something goes wrong, you know that you will be taken care of by a reliable provider.
Downsides Of Buying A Car With A Credit Card
If you’re planning on purchasing an expensive item such as a new car, then it would probably be wise to look for cheaper financing options first.
A lot of dealerships will try to sell you a product that has been overpriced due to high insurance costs.
In addition, some sellers may try to push you to accept a low down payment.
There is no doubt that buying a car with a standard bank loan is much easier than trying to get financed through a dealership or on a card.
But why do so many buyers prefer to get a loan? Well, it all depends on what kind of deal you are looking for.
For example, if you are looking for a cheap price, then you will find yourself dealing with a seller who does not require a large down payment.
On the other hand, if you are interested in getting the most value for your money, then you should go for a dealer who offers competitive prices.
Another disadvantage is the need for maintenance and repairs.
Buying a used car may save you money, but you’ll have to shell out more money for routine maintenance and repair work.
As a result, it could cost you hundreds of dollars in the long run. Of course, this is only applicable if you plan on keeping the car for quite a while.
Otherwise, you’ll need to make sure that you budget enough money to fix any problems before putting the vehicle back on the road.
Conclusion
You can definitely buy a car using a credit card, the issue is paying back that money.
Many people will not use a card simply because there are better options available, like standard loans, but if you are certain you can pay back the credit on time and the premiums aren’t too bad, then a credit card is the way to go when buying cars.
Frequently Asked Questions
If your car loan lender allows it, you can make a car payment with a credit card. However, credit card purchases impose fees on the merchant, so many loan servicers accept only cash-backed payment methods, like a debit card, check, money order or a direct transfer from a checking or savings account.
Unfortunately, most loan types prohibit you from making a payment directly with a credit card. Yes, there are some workarounds, but higher interest rates, processing fees and potential risk factors generally make those methods inadvisable. Here are some potential ways to pay a loan with a credit card.
The short answer is, entertainment and nonessentials can usually be paid with a credit card with no fees. Services, utilities, and taxes can often be paid with a credit card but with a processing fee. Loan payments are usually check or bank withdrawal payments only.
