Can I pay my car loan with a credit card to earn points?

Can I Pay My Car Loan with a Credit Card for Rewards? (Spoiler: Probably Not)

The allure of racking up valuable rewards points is strong, especially for a large purchase like a car. But can you use your credit card to pay off your car loan and earn those coveted points? Unfortunately, the answer is usually no.

Why is it so difficult?

Most car loan lenders prohibit payments made with credit cards. This restriction is in place for several reasons:

• Preventing Debt Cycling: Using a credit card to pay off a loan creates a cycle of debt. You’re essentially transferring the debt from your car loan to your credit card, potentially accumulating high interest charges on both.
• Avoiding Fees: Credit card companies often charge fees for using your card for transactions like loan payments.
• Maintaining Control: Lenders want to maintain control over the repayment process and ensure payments are made on time.

What are the alternatives?

While using a credit card for your car loan might not be an option, there are other ways to earn rewards:

• Credit Cards with Auto Purchase Perks: Look for credit cards that offer bonus rewards on car purchases. Some cards might provide points or cash back specifically on new or used car purchases.
• Rewards Checking Accounts: Consider opening a rewards checking account. Many banks offer bonus cash back or points for everyday purchases, including car payments.

Important Considerations:

• Credit Score: Paying your car loan on time significantly impacts your credit score. Make sure to prioritize on-time payments to build a strong credit history.
• Interest Rates: Avoid racking up debt on your credit card, as the interest rates can be significantly higher than your car loan.

The Bottom Line:

While it may seem like a convenient way to earn rewards, paying your car loan with a credit card is typically not possible. Focus on finding other ways to earn rewards while prioritizing on-time payments to protect your credit score and minimize unnecessary debt.