Using a credit card for your car’s initial payment has a definite upside, especially if you’re chasing rewards. Imagine earning a significant chunk of travel points or cash back on a multi-thousand-dollar down payment – that can be quite appealing! It’s also incredibly convenient; a quick swipe and you’re done, avoiding the need for a cashier’s check or large sum of cash. For some, it might even be a necessary bridge if other funds aren’t immediately liquid.
Also read: Do Car Dealers Take Credit Cards for Down Payment? 5 Shocking Facts That Could Save (or Cost) You $1000s
However, there are some serious downsides to consider. The biggest one is the potential for high-interest debt. If you don’t pay off that credit card balance quickly, those attractive rewards will be dwarfed by sky-high interest charges, making your down payment far more expensive than intended.
Dealers might also pass on those pesky processing fees to you, or limit the amount you can put on the card, which can negate the convenience factor. Plus, a large credit card balance can temporarily inflate your credit utilization, which might ding your credit score right when you’re trying to secure a car loan. Always weigh the immediate convenience and rewards against the long-term financial implications.