Your Trusted Guide to Smart Spending and Maximising Rewards !

Why Use a Credit Card for Car Payments?

Credit cards offer several advantages when used wisely for car payments:

• Rewards and Cashback – Earn reward points, miles, or cashback on large transactions.
• Interest-Free Period – If paid within the due date, you can defer cash outflow while benefiting from an interest-free period.
• Enhanced Security – Credit cards offer fraud protection and chargeback options, which are not available with direct bank transfers.
• Milestone Benefits – Some credit cards have milestone rewards that can be triggered by high spends.

However, not all dealerships or service providers accept credit card payments, and many impose convenience fees (typically 2-3%). Understanding these aspects in advance can help you make an informed decision.

Things to Keep in Mind While Making Car Payments Through Credit Card

1. Check for Acceptance and Transaction Fees

Many car dealerships do not accept credit cards for full vehicle purchases or down payments. Those that do often charge a convenience fee to cover processing costs, typically 2-3% of the transaction amount.

Pro Tip: If a dealer charges a fee, calculate whether the rewards earned outweigh the extra cost. Some premium cards provide enough value to make up for the fee.

2. Understand Your Credit Limit

Car payments can be substantial, so it’s essential to check whether your credit limit is sufficient to accommodate the transaction. Maxing out your credit limit can negatively impact your credit score and might even lead to a declined transaction.

Pro Tip: If your credit limit is low, you can request a temporary increase from your card issuer.

3. Be Aware of Interest Rates

Credit cards typically have interest rates as high as 48% per annum. If you don’t pay off the balance in full, the accumulated interest can significantly increase the cost of your car payment.

Pro Tip: If you need to carry a balance, consider using a credit card with a low-interest EMI option to minimize additional costs.

4. Maximize Rewards and Milestone Benefits

A high-reward credit card can help offset transaction costs when making large car payments. Many premium cards offer bonus points, milestone rewards, and cashback on high-value transactions.

Pro Tip: Choose a card that provides accelerated reward rates and milestone benefits on large purchases.

5. Monitor Your Credit Utilization Ratio

A high credit utilization ratio (above 30%) can negatively impact your credit score. Large transactions, such as car payments, can push utilization up significantly.

Pro Tip: To keep your credit utilization low:

• Pay off part of the balance before the statement is generated to lower reported utilization.
• Request a credit limit increase to maintain a better ratio.

Negotiate with the Dealer or Service Provider

Most dealerships have set policies, but in some cases, negotiation can help:

• Waiving Convenience Fees: Some dealerships might waive the fee if you ask, especially for large purchases or if you’re a repeat customer.
• Splitting Payments: If the dealer does not accept a full credit card payment, request to split the amount between a credit card and another payment method.

Best Credit Card for Car Purchases – Axis Magnus Burgundy

The Axis Magnus Burgundy is one of the best cards for large transactions like car purchases. Here’s why:

Reward Rates and Benefits

• Earn 12 eDGE Reward points per Rs. 200 on spends up to Rs. 1.50 Lakhs.
• Earn 35 eDGE Reward points per Rs. 200 on incremental spends above Rs. 1.50 lakhs in a calendar month, giving up to 24% returns when redeemed strategically.
• Airport lounge access, golf privileges, and other luxury travel benefits.

Conclusion

Using a credit card for car payments can be a smart financial move when done strategically. By selecting a high-reward credit card, monitoring credit limits, and negotiating dealer fees, you can maximize benefits while minimizing additional costs.

Key Takeaways:

• Confirm acceptance policies and fees before proceeding.
• Ensure your credit limit is sufficient for the transaction.
• Be mindful of high-interest rates if not paying in full.
• Use a high-reward card like Axis Magnus Burgundy for maximum benefits.
• Keep your credit utilization in check to protect your credit score.
• Negotiate for fee waivers or split payments where possible.

By keeping these factors in mind, you can make your car payment work for you, earning rewards while managing costs effectively.