Buying a Car with a Credit Card
By: Wendy Drews
Credit card users have learnt a lot of tactics to ‘beat the system’. They use 0% APR on balance transfers to put money into a high-interest saving’s account or sign up for plastics just to get a sign-up bonus and then close the account. Recently the idea of buying cars with credit cards to accumulate rewards has become very popular.
The technique is rather simple. You use your credit card to pay for a car and get points or miles for the amount of dollars you have spent (that would be quite a lot). Those points would be later redeemed for discounts, gift certificates or even cash. The whole thing sounds very easy. Is there a trick?
The first objection that comes to mind is that interest rate on credit card deals is much higher than that on auto loans. You are likely to lose more than you save with rewards. Moreover, an auto loan is considered to be ‘good credit’, it is secured with your car and wouldn’t damage your credit history as much as a huge balance on your credit card would.
Another problem is your credit line. If you exceed your credit limit you will have to pay a penalty fee. Your interest rate might also increase. Do not forget about your available balance that greatly influences your credit history. If you use your entire credit limit their will be no available credit and your credit history score will drop.
Obviously, this technique will also work for those credit card users who actually do have cash to buy a car and will be able to pay off their balance immediately. However, some credit card offers will require paying at least 30 day’s interest. You should check your credit card agreement to know for sure.
If you are a credit card user with good credit standing and big credit limit you can start looking for a dealer that would be ready to accept your credit card. That might not be easy. The dealership will have to pay as much as 3% to your credit card company for the transaction. Most won’t allow you to charge the whole sum to your credit card but only a portion.
Anyway, if there is a dealership that is ready to accept your credit card be sure that the 3% are included into the price of the auto. You will be the one to pay for the dealer’s expenses.
If you are still determine to use your credit card to pay for your car start looking for the best offer. Look for a deal that will give you most points for a dollar spent on car-related purchases. A new car can also give you 0% APR on purchases. That means you won’t have to pay high interest rate. A sign-up bonus will be nice, too.
The most important thin is to have money to pay off your balance. If you fail to do so your car will cost you way more that it would have with an auto loan.
Wendy Drews works with students and writes mainly about student credit card deals. She also has some articles on credit card deals for consumers.
Article Source: http://www.ArticleBiz.com
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