Can You Put a Down Payment on a Car with a Credit Card?

Using Credit Cards for Car Payments

A car buyer can use a credit card to pay some or all of the down payment and get an auto loan to cover the remaining balance. If you intend to do this, consider setting up automatic payments to prevent accumulating interest or late fees.

Although a down payment within your budget can help you pay less for the car you finance, using your credit card for your down payment can expose you to financial risks that could put you in a vicious debt cycle. Credit card-sourced down payments can also negatively impact your credit score if mishandled.

In the grand scheme of things, you are unlikely to make enough money through credit card rewards to balance out the costs associated with the use of a rewards credit card. It’s essential to consider every angle when making a big personal finance decision.

Reasons to Avoid Using Credit Cards for Car Down Payments

  1. You’ll Pay Higher Credit Card Interest Rates
  2. Using too much of your credit limit can negatively impact your credit score

Down Payment Considerations

A good rule of thumb for a down payment on a car loan is 20 percent of the purchase price. A down payment of 20 percent or more is a good way to avoid being “upside-down” on your car loan.

Debit cards work similarly to credit cards. While credit cards allow you to borrow money from a lender, debit cards use the funds available in your bank account. This means that a debit card transaction is essentially the same as paying with cash.

Most car dealerships accept cash, checks or debit cards for down payments. Credit cards may also be accepted, but should be used carefully by making sure to pay off the balance quickly to avoid high interest charges. The type of down payment impacts the total cost of purchasing and financing the car.

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