How to buy a car with a credit card in Australia

It's possible to buy a car with a credit card in Australia. However, there are a number of factors you need to consider, including the cost of the car, your credit limit, whether the seller accepts credit card payments, and surcharges and interest rates.

What are the pros and cons of buying a car with a credit card?

Pros

• Pre-approved credit. If you use your credit card (if you have a high enough credit limit), you don't have to go through the hassle of looking for or applying for another loan.
• Instant buy. You don't have to wait until your loan is processed and settled. If you want that car now, using your pre-approved credit could help you get the car straight away.
• Rewards. If you have a rewards or frequent flyer credit card, buying a car could help accumulate points. There are several caveats to this, as it depends on how the payment is made. BPAY payments, for instance, won't earn points. Rego could also be considered a government charge and may not earn points.
• Split costs. You could have cash ready for your new car, but you're a little short. You could use your credit card to cover the difference without applying for other finance.
• Interest-free periods. You could use a credit card with an introductory 0% purchase rate and not pay interest for a set amount of time. If you manage your repayments well, you could avoid paying interest entirely.

Cons

• Higher interest and fees. Once the promotion period is over, you'll be paying standard credit card interest rates. These rates are almost always higher than personal loans or car loans.
• Shorter loan terms. If you're sticking to the promotion period, you may have a window of 3 to 15 months to pay off the loan.
• Revolving credit with no set end date. With credit cards, you can pay just the minimum amount due. This could lead to debt you could carry for a while, with no definite end date in sight. It requires discipline on your part to pay off this debt.
• Surcharges and annual fees. Credit cards come with annual fees. You may also have to pay a surcharge. These add to the cost of the loan.
• No interest-free days with outstanding balance. With the car debt as your outstanding balance, you won't be able to take advantage of interest-free days for other purchases.
• Could use up your entire credit limit. A car is a big ticket item and it's likely you'll use up your entire credit limit. This means that you won't be able to use your card for other purchases, or it won't be enough. This could potentially create cash flow problems for you.

Will the merchant/seller accept a credit card?

This will depend entirely on the seller. A private seller is unlikely to have the facilities to process a credit card payment. But if you're buying from a dealer, it's possible they'll accept credit card payments.

Apart from making sure the seller accepts credit cards, you should also ask about fees and then weigh up the cost. Apart from the cost of the card and any interest you have to pay, there is likely to be a surcharge. These surcharges can range from 1% to 1.5% for Visa and Mastercard, and 1.5% to 2% for American Express. That's an additional 1% to 2% you'll be paying on top of all the other costs.

For instance, if the surcharge is 2% for a $10,000 car, it will cost you another $200.

What should I consider before buying a car with my credit card?

• Cost. There's the cost of the car, and then there's interest payments, fees and surcharges to account for. It may not be financially viable to use your credit card, so make sure you thoroughly crunch the numbers.
• Credit limit. You will only be able to use up to your credit limit. You could consider asking for a credit limit raise if your credit score is healthy.
• Repayments. Work out a repayment plan before you commit to the purchase. If you're working with a 0% or low purchase rate, calculate how you will pay it off during the promotional period of 3 to 15 months, as a standard higher rate will usually apply after this period.
• Depreciation. Cars can depreciate and lose value quickly. It may not make sense to pay high interest on a steadily depreciating asset as you may end up paying far more than it is worth.
• Surcharge. You may have to pay a surcharge, around 1% to 2% of the transaction value (or more, depending on your card type).
• Credit score. If you miss repayments, or don't make regular repayments, your credit score could take a hit. However, paying off your debt on time can help improve your score.
• Cash flow. If you plan to use most or all of your available credit, any other direct debits or regular repayments will be affected. Also note that you may not enjoy interest-free days on new purchases while carrying an outstanding balance on your credit card.
• Let your provider know. Sometimes large credit card transactions could be flagged by fraud monitoring services. If you're concerned about this, contact your provider ahead of time and let them know the purchase is planned.

What are my other financing options?

• Savings. It may take a while to save for the car, but this can be the cheapest option. There's no interest, no fees, and you could earn interest on your money by parking it in a high interest savings account.
• Car loan. With a car loan, you get the benefit of low interest rates and longer loan terms. Securing the loan with your car will get you a lower rate than an unsecured loan. Some car loans come with interest rates below 5%.
• Personal loan. Personal loans offer lower interest rates than credit cards. The loan can be either secured or unsecured and comes with longer loan terms. Another advantage is that you have a set loan term. Debt with a definite end date can be easier to handle than rolling debt.

With both car and personal loans, the repayments will likely have a lower impact on your finances. However, with a longer term, you'll be paying interest for the duration of the loan. Be sure to account for interest costs and any monthly or establishment fees in your calculations.

Bottom line

Buying a car with your credit card may not always work in your favour. The cost of interest builds up over time and can add to the cost of your car. You may be better off using your credit card only to pay for insurance and rego instead. It may make more financial sense to either save up for the car or find more affordable credit options.

Compare credit cards with high credit limits for buying cars

Name	Purchase rate p.a.	Bonus points	Points per $ spent	Interest-free period	Balance transfer rate p.a.	Annual fee
Citi Clear Card - Exclusive Offer Exclusive	Purchase rate p.a. 14.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 24 months with 1.5% balance transfer fee, then 22.24%	Annual fee $49 first year ($99 after)	Go to siteMore Info Compare	Offers 0% p.a. on balance transfers for 24 months (with 1.5% balance transfer fee) and a $49 first-year annual fee. Plus, 6-month complimentary Uber One membership valued at $9.99/month.
Bankwest Breeze Platinum Mastercard	Purchase rate p.a. 0% for 12 months, then 12.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 12 months with 2% balance transfer fee, then 12.99%	Annual fee $69	More Info Compare	Get 0% p.a. interest on purchases and balance transfers for 12 months (with a 2% BT fee). Plus 0% foreign fees and complimentary overseas travel insurance.
American Express Velocity Platinum Card Velocity Frequent Flyer	Purchase rate p.a. 23.99%	Bonus points 100,000	Points per $ spent 1.25	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a.	Annual fee $375	Go to siteMore Info Compare	Partner Offer: Get 100,000 bonus Velocity Points when you spend $3,000 in the first 3 months. Plus a return domestic flight each year. Ends 06 February 2024.
Latitude 28° Global Platinum Mastercard	Purchase rate p.a. 26.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a.	Annual fee $0	More Info Compare	Save with 0% international transaction fees on purchases. Plus, complimentary Flight Delay Pass and global data roaming.
ANZ Rewards Black Credit Card ANZ Rewards Program	Purchase rate p.a. 20.49%	Bonus points 180,000	Points per $ spent 2	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 21.99%	Annual fee $375	More Info Compare	Get 180,000 bonus ANZ Reward Points (worth $800+ in digital gift cards) and $150 back when you spend $3,000 in the first 3 months.
Qantas Premier Platinum Qantas Frequent Flyer	Purchase rate p.a. 19.99%	Bonus points 80,000	Points per $ spent 1	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 12 months, then 21.99%	Annual fee $349 first year ($399 after)	Go to siteMore Info Compare	Earn up to 80,000 bonus Qantas Points. Plus, save with a reduced first-year annual fee and 0% p.a. for 12 months on balance transfers.
ANZ Rewards Platinum ANZ Rewards Program	Purchase rate p.a. 20.49%	Bonus points 80,000	Points per $ spent 1.5	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 21.99%	Annual fee $149	More Info Compare	Get 80,000 bonus ANZ Reward Points (worth $350 in eGift cards) and $50 back when you spend $2,000 on eligible purchases in the first 3 months.
Qantas American Express Ultimate Card Qantas Frequent Flyer	Purchase rate p.a. 23.99%	Bonus points 100,000	Points per $ spent 1.25	Interest-free period Up to 44 days on purchases	Balance transfer rate p.a.	Annual fee $450	Go to siteMore Info Compare	Get 100,000 bonus Qantas Points when you spend $3,000 in the first 3 months. Plus, a yearly $450 Travel Credit.
American Express Qantas Business Rewards Card Qantas Business Rewards	Purchase rate p.a. 0%	Bonus points 150,000	Points per $ spent 1.25	Interest-free period Up to 51 days on purchases	Balance transfer rate p.a.	Annual fee $450	Go to siteMore Info Compare	ABN holders w/ $75k revenue. Earn 150,000 bonus Qantas Points when you spend $3,000 in the first 2 months.
Qantas Premier Titanium Qantas Frequent Flyer	Purchase rate p.a. 19.99%	Bonus points 150,000	Points per $ spent 1.25	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 6 months, then 21.99%	Annual fee $1,200	Go to siteMore Info Compare	Get 150k bonus Qantas Points when you spend $5k in the first 3 months. Plus Qantas First Lounge Invitations and 20% bonus Status Credits on eligible flights.
ANZ Platinum Credit Card	Purchase rate p.a. 20.49%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 21.99%	Annual fee $0 first year ($87 after)	More Info Compare	Get $300 back on your card when you spend $1,500 on eligible purchases in the first 3 months and a $0 first-year annual fee. Plus, complimentary overseas travel insurance.
St.George Amplify Signature Amplify Rewards	Purchase rate p.a. 19.49%	Bonus points 150,000	Points per $ spent 1.5	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 24 months with 1% balance transfer fee, then 21.49%	Annual fee $199 first year ($295 after)	Go to siteMore Info Compare	150,000 bonus Amplify Points (worth $675 in gift cards) when you spend $12,000 in the first 12 months. Plus, a first-year annual fee discount.
ANZ Frequent Flyer Platinum Qantas Frequent Flyer	Purchase rate p.a. 20.49%	Bonus points 75,000	Points per $ spent 0.75	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 21.99%	Annual fee $295	More Info Compare	Get 75,000 bonus Qantas Points and $100 back when you spend $2,500 on eligible purchases in the first 3 months.
Citi Rewards Card - Velocity Points Offer Velocity / Citi	Purchase rate p.a. 21.49%	Bonus points 80,000	Points per $ spent 1	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 6 months, then 22.24%	Annual fee $149	More Info Compare	Earn 80,000 bonus Velocity Points when you spend $5,000 in the first 90 days. Plus, complimentary insurance covers.
HSBC Star Alliance Credit Card Star Alliance	Purchase rate p.a. 19.99%	Bonus points N/A	Points per $ spent 1	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 12 months with 2% balance transfer fee, then 21.99%	Annual fee $0 first year ($450 after)	More Info Compare	Get Star Alliance Gold Status when you spend $4,000 or more on eligible purchases in the first 90 days. Plus, 0% interest for 6 months on eligible flights
Citi Clear Card - Balance Transfer Offer	Purchase rate p.a. 14.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 28 months with 2% balance transfer fee, then 22.24%	Annual fee $99	More Info Compare	Offers 0% p.a. on balance transfers for 28 months with a one-time 2% balance transfer fee. Plus, complimentary insurance covers.
Citi Premier Qantas Card Qantas Frequent Flyer	Purchase rate p.a. 21.49%	Bonus points 70,000	Points per $ spent 0.5	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 22.24%	Annual fee $350	More Info Compare	Get up to 70,000 bonus Qantas Points when you meet the spend requirement. Plus, complimentary lounge passes and international travel insurance.
Citi Premier Card - Velocity Points Offer Velocity / Citi	Purchase rate p.a. 21.49%	Bonus points 80,000	Points per $ spent 1	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 15 months, then 22.24%	Annual fee $300	More Info Compare	Earn 80,000 bonus Velocity Points when you spend $6,000 within the first 90 days.
P&N Bank & Visa Platinum Credit Card	Purchase rate p.a. 7.22%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 45 days on purchases	Balance transfer rate p.a. 7.22%	Annual fee $0	More Info Compare	Offers a very low 7.22% p.a. variable rate for purchases, $0 annual fee and complimentary insurances. Eligible home loan customers only.
CommBank Ultimate Awards Credit Card with Qantas Points Qantas Frequent Flyer	Purchase rate p.a. 20.99%	Bonus points N/A	Points per $ spent 0.8	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a.	Annual fee $480	More Info Compare	Opt-in to earn Qantas Points and get up to 1.2 points on eligible purchases. Plus, 0% foreign fees & included international travel insurance.

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