Can I make a car payment with a credit card?

Depending on your lender, you may be able to make a car payment with a credit card. But not only is this uncommon, due to the fees that it would place on the lender, there are also other reasons to think twice before you go this route if it’s available.

You could end up paying credit card interest on the transaction and get hit with a fee, making your car payment even more expensive. And, on top of the added costs, racking up debt on your credit card could lower your credit scores.

Let’s take a look at some ways you might be able to make a car payment with a credit card, as well as the associated drawbacks.

How can I use a credit card to make my car payment?

Whether you can make a car payment with a credit card depends on your lender. Some only accept certain payment methods, such as checks, debit cards, electronic checks or fund transfers from a bank account, or money orders. Others accept credit cards, but they may require you to make the payment through a third-party payment processing company that charges a transaction fee.

There are other ways you may be able to make a car payment with a credit card, but they could cost you.

Cash advance

A cash advance — borrowing money against your credit card’s limit — is another way you can use your credit card to make a car loan payment. You can get a cash advance several ways, including withdrawing cash at an ATM or a bank branch. Keep in mind that if you use an ATM, you might be charged an ATM fee. And with a cash advance, your credit card issuer will likely charge a cash advance fee and a higher interest rate than it would on purchases.

Money transfer

Some lenders accept payments through money transfer services such as Western Union or MoneyGram. You may be able to fund the transaction using a credit card, but keep in mind that your credit card issuer may treat it as a cash advance. That means you’d be subject to credit card interest and cash advance fees on top of any fees charged by the money transfer service.

These costs can add to your loan payment

The costs associated with using a money transfer service or getting a cash advance can add up. Let’s say your monthly car loan payment is $300. You decide to use a money transfer service to make your payment, and the service charges a transfer fee of $21.50. Your credit card issuer treats the transaction as a cash advance and charges a cash advance fee of $10 or 3% of the transaction, whichever is greater. That means you’d end up paying an estimated $331.50 — an additional 10.5% of your monthly car loan payment, plus interest — on your cash advance if you don’t pay the full amount before the next billing period.

Drawbacks of making a car payment with a credit card

In addition to the potential fees and cash advance interest charges, paying your car loan with a credit card can come with other drawbacks.

Additional interest charges

Using a credit card to make a car loan payment could mean you pay two types of interest charges. Unless you have a 0% APR on your car loan, your car payment will include a mix of principal (the amount you borrowed to buy your vehicle), interest and any loan charges. If you use a credit card to make a car loan payment and make the minimum payment — versus paying your credit card balance in full by the next payment due date — you’ll end up paying credit card interest on the transaction as well.

If you make a car payment with a credit card, another way to avoid interest charges is by using a card with an introductory 0% APR offer and paying the balance in full before the intro period ends.

May negatively affect your credit scores

Putting one or more car loan payments on a credit card can increase your credit utilization, or how much of your available credit you’re using. This number factors heavily into many credit scores, and a high ratio can negatively affect your scores. It’s generally a good idea to use as little of your credit as you can — experts recommend that you aim for using less than 30% of your total credit limit.

Next steps

It’s unlikely that you will be able to make your car payment with a credit card. And even if you can, making a car payment with a credit card could end up being an expensive move and should be avoided, if possible.

If you don’t have enough cash in hand to make a one-time car payment, consider asking a friend or family member if you can borrow the money. Even if they charge you interest on the loan, you may be able to pay less in interest than if you made the payment with a credit card.

But if you find that you’re struggling to come up with the cash for your car payment each month, here are a couple of things to consider.

• Reach out to your lender. Your lender may be willing to renegotiate your loan terms, defer your payment or offer other forms of financial assistance.
• Refinance your auto loan. You might be able to get a lower interest rate or lower monthly payments that could make your loan more affordable.