Today, credit cards are being used not only for shopping and bill payments, but also for large expenses, such as buying a car. Paying for a vehicle using a credit card is convenient, but it is very important to understand its benefits and limitations. Before you plan to earn rewards points, consider all the ins and outs of purchasing a vehicle with a credit card.
Is it possible to pay for the entire vehicle with a credit card?
The idea of buying a car with a credit card may seem appealing, but it’s not that simple. Most car dealerships accept credit cards only up to the booking amount.
booking amount
- Generally the booking amount is equal to the total price of the vehicle. 5-10% It happens.
For example, the booking amount for a car worth ₹10 lakh can range between ₹50,000 to ₹1 lakh. - Some premium brands (like Skoda and VW) as booking amount up to ₹1 lakh Accepts payment by credit card.
- This amount in case of premium vehicles ₹3-5 lakh can happen till
However, it is often not possible to pay the full price with a credit card.
Why are dealerships hesitant?
Most dealerships do not accept credit cards for the full price of the vehicle. The main reason behind this is merchant transaction fees,
Impact of merchant fees
- Dealership on every credit card transaction From 1.75% to 2.5% Transaction fee has to be paid.
- If the customer American Express Card Uses this fee 2.5% Can increase up to.
- These fees directly impact dealerships’ profits, preventing them from accepting large credit card payments.
Benefits and precautions of buying a car with credit card
1. Know merchant fees
When paying by credit card, it is important to ask the dealership if they are charging any additional fees.
- some dealerships Processing fee up to 1-2% Combines.
- This fee may increase your total payment.
2. Keep in mind the interest rate
The interest rates on credit cards are much higher than those on personal and vehicle loans.
- If you do not pay the outstanding amount on time, the interest rates can increase rapidly.
- Consider that Benefits of reward points The additional interest may or may not be justified against the expense.
3. Opportunity to earn reward points
You can earn a good amount of reward points when you make big purchases with a credit card.
- However, for this, understand the reward structure of the card thoroughly.
- Make sure the value of reward points exceeds fees and interest.
4. Keep track of credit limit and credit score
- Your credit card limit should be sufficient for the cost of the vehicle.
- Yours from big transactions Credit Utilization Ratio This may increase, which may have a negative impact on the credit score.
- Request a credit limit increase if needed or split the payment into installments.
5. Impact of Merchant Category Code (MCC)
- The merchant category code (MCC) of a credit card can affect the reward points rate.
- If the merchant’s MCC does not match your card’s bonus category, you may not receive the expected rewards.
Benefits of credit card payment
- Facility: Credit card is a convenient option for making payment of booking amount or partial payment.
- Rewards and Cashback: You can get attractive reward points and cashback on big purchases.
- Flexible Payment: You can repay the amount within the interest-free period.
Disadvantages of credit card payment
- interest burden: If you do not repay the outstanding amount on time, you have to face heavy interest rates.
- additional charges: Expenses for processing fees and merchant fees may increase.
- impact on credit score: A high credit utilization ratio can have a negative impact on the credit score.
