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I have enough cash to pay off a car I'm planning to buy.

However, instead of using cash on a debit card, I thought of using my credit cards instead so I can earn points on them.

Are there any drawbacks to this that I'm not seeing yet?


I sent out emails to dealers asking if they accept credit cards. Most of them replied and said that they charge 2% or so for credit card transactions, and 2% of a $20k-ish car is $400, and I don't think frequent flyer points are worth that much.

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    There will probably be a limit on the amount you can charge to a CC, maybe $5K, assuming they will accept it at all (some do for down payment only). It's costing the dealership something so you might want to be cagey about it if you're still negotiating the price. – Spehro Pefhany Jul 6 '15 at 17:54
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    Have you checked that this is an option? Most dealers explicitly won't take a credit card for the full value of a car. – DJClayworth Jul 6 '15 at 20:28
  • @DJClayworth - I edited a new paragraph into my question regarding this being an option. It IS an option, but sadly I don't think the fees justify the frequent flyer points. – Mark Gabriel Jul 7 '15 at 1:03
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    frequent flier points are definitely not worth that much. Think of them as a form of currency that you can only spend on one thing with one merchant, versus dollars that you can spend on anything. Otherwise, why wouldn't you just buy $400 of points from the airline instead of complicating your car deal? – JohnFx Jul 7 '15 at 2:13
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Biggest drawback: if you fail to pay the credit cards immediately you may get zapped with more interest than you could recover in points. There's also the question of whether the dealer accepts credit cards; they may not. Find that out first, then if you still want to do this consider prepaying into the credit card account so you can't miss that payment.

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You can use your credit card to accumulate points, and pay it off with your debit card right away.

The downside is the ~20% APR when you accumulate credit card debt.

  • Of course you could just sign up for one of the cards that gives you a year or two of 0% interest. – jamesqf Jul 6 '15 at 17:46
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No. Only use your credit card when you are money rich and time poor.

As you've noted putting the transaction through VISA, Mastercard (etc) will cost them ~$400 in transaction fees.

A bank cheque goes for ~$15.

Is an hour of your time worth $385/hr? Let's be generous and say that all-up it takes you an hour to physically get down to a bank branch during business hours. You pay your ~$15 for a bank cheque from the teller and take that to the dealer. Save ~$385.

Obviously, you only save that money if, when negotiating exactly what number to put on the cheque, you factor this in by pointing out that by getting a bank cheque you're saving the dealer $400 in transaction fees.

One strategy is to haggle hard without mentioning it until you agree to an exact figure and it seems to be all final. Then spring it and shave another 2% off the total. Alternatively, mention it early and they'll be factoring into the negotiation all along and allow you to drive them a little bit lower than when paying by CC.

(Beware that most AU banks regard an over-the-counter event as a sales opportunity so don't be caught unaware: their kind offer to help get a better interest rate, or credit card—or whatever it is—it is not necessarily you they're trying to help).

  • and some banks, like my credit union, don't charge for cashier checks – warren Jul 10 '15 at 15:38

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