How I Bought a Car With a Credit Card, Earned Rewards and Didn’t Pay Any Interest

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Buying a car is a big financial commitment. Some people get an auto loan, others pay all in cash. And some of us use a credit card to buy a car. That’s what I did, and I earned a bunch of rewards in the process. But if you want to take this approach, you’ll need to tread carefully so you don’t get stuck paying high interest fees. If you’re looking for tips from someone with firsthand experience, read on. Here are the four steps I used to buy a car with my credit card—and rack up a nice pile of rewards in the process.

1. I Saved Funds in Advance

I'm not a big fan of a car payment. So, when my husband and I paid off our last vehicle loan several years ago, we took a portion of the money we'd been paying our former lender each month and started a savings account.

We earmarked the cash we saved for both vehicle repairs and a future vehicle purchase. After several years of this habit, we had enough cash available to purchase a used car when the time came.

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2. I Decided on the Best Credit Card to Use to Buy a Car

Eventually, one of our vehicles died, and it was time to buy a replacement for our family. Instead of getting a cashier's check from the bank to cover the purchase, I decided to pay for our new car with a credit card.

Now, I would have liked to open a new credit card here to earn a sign-up bonus with my purchase. But the timing wasn't right. I was eight months pregnant with a high-risk pregnancy during the middle of a global pandemic, and I had two elementary-aged kids at home 24/7 due to school closures. Plus, I was working full-time. (Fun times!)

Needless to say, life was hectic. Meanwhile, our need for a vehicle was immediate.

Since I didn't have the time to apply and wait for a new credit card, I decided to use my Chase Sapphire Reserve®. With this card, I would earn points for each dollar I spent on the vehicle purchase. But when I redeem those points with a Chase airline or hotel partner in the future, I knew that I might score an amazing travel deal and maximize my rewards value.

3. I Found a Car Dealership Willing to Accept a Credit Card

I knew not every car dealer would let me pay for my vehicle with a credit card. Businesses have to pay processing fees when they accept credit card payments, sometimes as high as 3% of the transaction.

So, my husband did some online research and found several reliable used vehicles at local dealerships that were a good fit for our family of five. We set out to test drive them and pick our favorite.

Once we knew which vehicle we wanted, we started negotiating the price. After a bit of haggling (and letting the dealer know we were prepared to pay for the vehicle in full that day), the car dealer knocked almost $1,000 off an already competitive sticker price. Only after we agreed upon a purchase price did we ask if we could pay for our purchase with a credit card.

We were lucky. Despite the merchant processing fees, the auto dealer was willing to let us pay for the $8,500 car purchase with my Chase Sapphire Reserve®. We'd been prepared to walk away and keep looking, but in the end it wasn't necessary.

4. I Paid My Credit Card Balance in Full

The following month, I used our savings to pay my credit card bill in full. Paying off the statement balance by the due date helped me avoid paying expensive interest fees. At the same time, I earned an extra 8,500 Chase Ultimate Rewards points that I wouldn't have gotten if I'd paid with cash.

Maximizing My Rewards

I have no regrets about purchasing a car with my credit card. Because I used my Chase Sapphire Reserve®, the 8,500 Chase Ultimate Rewards points I earned are worth 1.5 cents each if I redeem them for travel through the Chase Travel℠ portal. However, I plan to transfer the points to a Chase airline or hotel partner down the road and hopefully get even more bang for my buck.

That said, I am a little disappointed I missed the opportunity to use this large purchase to meet a minimum spend requirement for a new credit card sign-up bonus. If our family hadn't needed a vehicle so quickly, this is the approach I would have taken. Then, my $8,500 purchase might have helped me qualify for a credit card with an attractive sign up bonus.

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Bottom Line

Buying a car with a credit card can pay off big time if you plan ahead and have the funds to cover the expense. If you're thinking about buying a car with a credit card, here are three tips to consider:

1. Save the purchase price first: Most credit cards have high interest fees compared with other types of financing, like auto loans. If you don't have enough cash set aside to buy a vehicle outright, you can probably find a better financing option.
2. Find a good rewards credit card sign-up bonus: Consider boosting your points-earning potential with a new rewards credit card and use your large purchase to satisfy minimum spend requirements.
3. Pay off your credit card balance immediately. It's always best to pay your full statement balance by your due date. This good habit will help you avoid costly interest and maintain a positive payment history on the account as well.

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