Buying a Car with a Credit Card

[tommie frazier]

Has anyone done this?

I was wondering about this when I read a Capital One flyer the other day. They said they'd let you pay off whatever balance you wanted on any type of loan and load it onto their card. Credit limits offered were pretty high.

Then, for like 12-15 months, you pay no interest.

So if you had a new car with a loan on it, could//would you do this? You would then likely have to roll that balance to a new no interest card in 15 months (does anyone think these offers won;t be around then?). If you did this, you would save about $40/month for a $15000 loan at 5.9%.

Is there a downside to any of this for the person doing it?

[The Drunken Actuary.]

I see no downside. Are there credit card fee? Open a home equity line of credit and then transfer the loan to that after the no interest period. Or transfer to another 0 interest card. Oh, you said that.

[Mayor Quimby]

I did this for a used car that I fully intend to pay off before the 0% interest expires. The only catch that my CC compay hit me with is a "balance transfer fee" of like $50. Still well worth it though, and avoided the inconvenience of going through the bank.

[Mayor Quimby]

By the way, your credit rating takes a bit of a hit when you transfer a balance between 0% interest cards real often. Doing it once is probably not a big deal, but if you're buying a fairly expensive car, and you plan to shift this balance three or four times, then that's probably unwise.

[1695814]

The only catch that my CC compay hit me with is a "balance transfer fee" of like $50. I've been looking into this recently, so I've been reading lots of fine print.

Most companies charge 3% of the balance tranferred up front. Some limit it to $50, $75, or no limit at all.

Still, 3% < 6% (or so I've heard), so you may still be better off transferrrrring.

[IAm@Work.com]

Is there a downside to any of this for the person doing it?Read the fine print.

The most likely downside works like this:

You transfer the car loan with the expectation of no interest.
The CC company requires that you use the card at least once a month.
Each month you pay your bill plus $300 toward the car.
The CC company applies the entire amount you pay against the initial transfer.
Next bill shows that you have paid nothing on last months purchases and owe the standard 19% on those amounts.
The balance transfer continues to rack up 0 interest while everything else you but gets 19% month after month.

I have heard that if there is no further restriction on that "at least one purchase per month" you can simply buy a $0.79 candy bar and let the interest pile up.

[Salzmann]

Two other possible pitfalls: first, make sure that the calculation of the payoff figure on your car loan is a fair one. That can be hard to find out in advance of the deal- you need to read the fine print on your loan.

The other is that they can "ratejack" if you're late on another credit card payment or on your mortgage, or even if your FICO score tanks because you take on more debt. So, the zero rate can disappear any time the credit card company decides you're riskier than they originally thought.

[Incredible Hulctuary]

If you're going for this deal, don't do the balance transfer at the same time as applying for the card. Get the card, know its limit, then buy the car and do the transfer.

Otherwise you could find yourself getting a dinky little credit limit like $2000 (which happened to me with Capital One a few years ago), and you still have the bulk of the other loan to worry about. I promptly canceled that card, as it was a waste of time with all my other cards being at least 3X that much.

[twig93]

By the way, your credit rating takes a bit of a hit when you transfer a balance between 0% interest cards real often. Doing it once is probably not a big deal, but if you're buying a fairly expensive car, and you plan to shift this balance three or four times, then that's probably unwise.

It dings your credit a little, but not much. If you're going to do this, you want to think about your credit. How good is it currently? Do you anticipate needing pristine credit in the near future?

If you're going to buy a house next year, you want your credit to be pretty good. If you already have a house and sufficient credit cards, and this car is going to be your last auto purchase for the next few years, how much do you care if your credit score goes down 10 points?

Even if you are going to be utilizing your credit in the future, if your credit is good now, it's probably not going to go down so much as to cause a problem. I floated a new piano from one 0% interest card to the next for about 3.5 years right after I got divorced. During that time I bought & sold two houses and right after the piano was paid off I bought a new car. Every time I qualified for the best rate. For some idiotic reason when I went to buy a computer, Dell wouldn't even talk to me about credit. I think that had more to do with the fact that I'd moved twice in 3.5 years than anything else though. I finished the 0% interest card game a year ago, and in September I bought a house with my fiance and we qualified for a great rate: 5.75% on a 30 year fixed-rate jumbo loan (with 0 points). So I don't think the plethora of 0% cards hurt me too much. My credit score was somewhere in the mid 700's.

What I did make certain I did was to close the accounts as soon as I paid off the balances, and I'm pretty sure that is very important. Having a ton of unused credit available at your fingertips is bad. Even though you don't owe a lot right now, in the eyes of the potential creditor you could go on a spending spree tonight and owe it all tomorrow.

[Animal]

What I did make certain I did was to close the accounts as soon as I paid off the balances, and I'm pretty sure that is very important. Having a ton of unused credit available at your fingertips is bad. Even though you don't owe a lot right now, in the eyes of the potential creditor you could go on a spending spree tonight and owe it all tomorrow.


I heard the opposite from a loan officer. She told me having available credit is good since it shows you are not in the habit of maxing out.

Maybe having too much available is bad, I don't know.

[tommie frazier]

having some available credit = good.

having too much = scary.

[Andy The Clown]

I purchased my car three years ago with a credit card check. It was 4.9% for the life of the loan with $0 for the advance. The car dealer was offering 4.9% or a $2,000 rebate. So I got the rebate and used the credit card to get 4.9%.

As other people have mentioned, just don't be late or boom you will be hit with a +20% interest rate.

[Incredible Hulctuary]

What I did make certain I did was to close the accounts as soon as I paid off the balances, and I'm pretty sure that is very important. Having a ton of unused credit available at your fingertips is bad.Search the web for info on improving your credit score, and you'll see that having lots of available but unused credit isn't a bad thing anymore (although it used to be).

Apart from the obvious importance of the absolute amount of debt you have, more recent credit modeling techniques show that having a high debt relative to available credit is a more important risk factor than having lots of available credit.

True, theoretically having all that available credit could mean you'll suddenly go into massive debt. But on the other hand, the fact that you had so much available credit and didn't use it shows discipline. And the extra credit can even be used to help you pay your debts through short-term financial troubles.