I bought a car with a credit card. There, I said it, and now everyone can gasp for air as I explain how I bought my latest car with a credit card. I drive a Mini Cooper S, a used car that I bought for just under $19,000 earlier this year, after selling my Subaru Forester for a more city-ish car. After all, I didn’t really need a 4WD station wagon in Los Angeles, did I? But back to the topic at hand – buying an automobile with a credit card. It’s generally frowned upon to buy a car in this matter, because you are at the mercy of the credit card company in terms of your interest rates, monthly payments, fees and charges, and just a general sense of dread when one gets a credit card bill every month saying one owes $18,000 or so. Sure, you can get 0% cash advances or promotional APR’s to buy a car with, but what if you don’t pay off that balance when the interest rate reverts back to 23.9%? What if you miss a payment and the interest rate goes back up only one month into making payments? That wouldn’t be too fun, nor would it be too smart a move. That’s why we all generally take out auto loans direct from lenders, where we know up front just what the interest rate is, how much the monthly payment is, and when we will be done paying off the loan. But with a credit card, a lot of those variables can change at any moment. Unless…
You have the cash on hand to buy a car, but use a credit card anyway.
As most long-time readers of My Two Dollars probably know, I use my Chase Amtrak Rewards card for almost everything – monthly bills, the majority of general purchases, paying my taxes – because traveling by rail is my favorite way to travel back and forth to see family back east. Using this card for everything allows me to rack up the points to trade in for free rail train tickets, effectlvely making travel either free or dirt cheap. I use that card as much as humanly possible. So when it came time to buy my Mini Cooper, I got to thinking about whether or not I could use my credit card to buy the car. After all, I really only had 2 choices:
1. Get out a loan and make monthly payments.
2. Buy the car outright in cash.
I didn’t really want to have monthly payments anymore, especially since I had the cash on hand to pay for the car in full. But instead of whipping out a roll of hundreds to pay for the car, I asked if I could pay with my credit card, which has more than enough open credit to pay for such a purchase… and they said yes. So pay with the card I did.
That purchase earned me over 18,000 reward points.
Since it only takes 35,000 points to get a free ride (with private bedroom) across the entire country on Amtrak, this single purchase got me another 1/2 of a ticket, at no cost to me. As soon as the charge showed up on my credit card, I transferred the money from my ING account, and paid off the bill with cash. This idea is similar to what Jim at Bargaineering talks about in terms of buying coin money with a reward card to get the points, but on a little bit bigger scale. Not all car dealers/dealerships will let you do it, but I know someone else close to me who also bought their car this way, so it most definitely can be done. So if you have the cash to back up your purchase, I say most definitely buy your next car with a credit card if you are able. If you don’t have the cash on hand, I would avoid, at all cost, buying a card on a credit card. There are too many variables in play when you do that, and your payments and/or interest rate can change at any time.
Photo by Hugo90