Can You Pay a Car Loan With a Credit Card?

Paying a car loan with a credit card is a common query for financial management or rewards. While direct payments to lenders are generally not an option, indirect methods exist. Car loans are typically structured as installment loans, distinct from the revolving credit of credit cards.

Methods for Paying a Car Loan with a Credit Card

Direct payments of car loans are usually not accepted by lenders, who typically prefer bank transfers, checks, or debit cards. However, several indirect approaches allow for using a credit card to cover car loan expenses.

One indirect method involves using third-party payment services. Companies like Plastiq enable individuals to pay bills, including car loans, with a credit card, even if the payee does not directly accept cards. These services act as intermediaries, charging your credit card and then remitting payment to your loan provider via check or electronic transfer. A processing fee typically applies, often around 2.9% of the transaction amount. Some lenders may also facilitate payments through other third-party processors like CheckFreePay or MoneyGram, which charge fixed fees ($3.28-$6.75).

Another approach is a balance transfer. This involves moving debt from your car loan to a credit card, often to take advantage of promotional low or 0% Annual Percentage Rate (APR) offers. This can be done by requesting the credit card issuer to send funds directly to your car loan provider or using balance transfer checks. If successful, the car loan debt then resides on your credit card.

A less advisable method is obtaining a cash advance from your credit card to pay the car loan. A cash advance is essentially a short-term cash loan against your credit card’s limit. You can typically withdraw cash from an ATM or a bank branch. This method is generally considered the most expensive due to immediate fees and high interest rates.

Costs and Credit Implications

Using a credit card to pay a car loan carries significant financial implications due to fees, interest rates, and credit score impacts. Transaction fees for third-party payment services typically range from 2.9% to 3% of the payment amount. For instance, a $300 car payment through such a service could incur a fee of $8.70 to $9.00. Balance transfers also involve fees, commonly between 3% and 5% of the transferred amount. A $10,000 car loan transferred to a credit card could result in an upfront fee of $300 to $500.

Cash advances are particularly costly, usually coming with a transaction fee of 3% to 5% of the advanced amount, or a minimum of around $10. For example, a $500 cash advance could incur a $25 fee. Interest on cash advances begins accruing immediately, without a grace period, and at a significantly higher APR than regular purchases or car loans. While average credit card APRs are around 23.99% as of August 2025, cash advance APRs can range from 17.99% to 29.99%. This contrasts sharply with average car loan interest rates, which were 6.73% for new cars and 11.87% for used cars in the first quarter of 2025.

Beyond fees and interest, utilizing a credit card for car loan payments can negatively affect your credit score. Credit utilization, the amount of credit used compared to total available credit, accounts for a substantial portion of your credit score (30% of FICO, 20% of VantageScore). Increasing your credit card balance by transferring a car loan can significantly raise your utilization ratio. Keep credit utilization below 30% of available credit, with under 10% being more favorable. High utilization signals increased risk to lenders and can lead to a decrease in your credit score.

Important Considerations Before Payment

Before deciding to use a credit card for a car loan payment, evaluate the total cost. This includes all potential fees (third-party processing, balance transfer, cash advance) and accrued interest over the repayment period. Comparing this comprehensive cost to the remaining interest on your existing car loan helps determine if any financial benefit exists.

Assess your current credit health. Review your credit utilization ratio and credit score to understand how a substantial balance might impact your credit. A higher credit utilization can be detrimental, and a hard inquiry from opening a new credit card for a balance transfer could also temporarily lower your score.

Understand your repayment capacity. If considering a balance transfer with an introductory 0% APR, ensure you have a realistic plan to pay off the entire transferred amount before the promotional period expires. Failing to do so will result in the remaining balance accruing interest at the card’s standard, often higher, APR.

Finally, review both your car loan agreement and credit card terms. Check your car loan for any prepayment penalties, which some lenders may charge for early payoff. These penalties, typically around 2% of the outstanding balance, can diminish any perceived savings. Examine your credit card agreement for specific terms related to balance transfers or cash advances, including fees, interest rates, and limitations.