Updated July 6, 2021|3 min read
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Most insurance companies will accept credit cards and debit cards as forms of payment. However, before deciding to put your car insurance premiums on your credit card, you need to determine if this is the best option for your budget.
Paying some of your monthly bills with a credit card has its benefits: It can be a good way to earn extra rewards points, depending on your card, and it can give you more time to make your payments.
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But putting your bills and other monthly payments on a credit card can also be risky — sometimes using a credit card can mean extra fees or charges, and putting too many different payments on your credit card can lead to credit card debt if you aren’t able to fully pay off your balance each month.
Paying for car insurance with a credit card, like paying any bill with a credit card, has its pros and cons, and different car insurance companies may have different rules about putting your payments on a card. That said, most major insurance companies make it possible to do so. Here’s what you need to know if you’re considering putting your car insurance payments on a credit card.
Most car insurance providers accept credit cards as a form of payment. You should double check with your insurer to see if any additional fees apply
Depending on your credit card company, you can earn reward points for using your card
However, you should make sure you are making your credit card payments in full every month so you can avoid paying interest on your premiums
If you rent a car but do not have your own car insurance, your credit card company may actually offer a certain amount of car insurance coverage on the rental
Most major car insurance companies will give you the option of paying your car insurance premium with a credit card, and many give you the choice of making your payments through various channels:
Online through your insurer’s website
Over the phone
Through a mobile app (depending on your insurance company)
But before you go ahead and put your monthly payment on your credit card, check to see whether your car insurance company charges you any additional fees for paying on a card.
Some car insurance companies will charge a fee if you use a card for monthly payments, but will waive any fees if you use your credit card to pay your annual premium in full. Paying your annual car insurance payment up front can also earn you other discounts, so if you can afford to do it, it can be a smart choice.
But it’s important to remember that putting your car insurance payments on your credit card doesn’t mean you’ve delayed paying your premiums indefinitely. It’s crucial to make your credit card payments in full every month, otherwise you risk having to pay interest. Credit card interest is vastly higher than interest on any other kind of loan, it can be more than 20%, meaning you’ll lose a ton of money, and may risk going into debt, if you put your insurance payments on your credit card and then can’t afford to pay your credit card bills.
That said, if you stay on top of your finances and make sure to pay off your credit card balance in full and on time, then putting your car insurance payments on your credit card may make sense for you.
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There are a number of reasons you may want to put your car insurance payments on a credit card. Those benefits include:
Earning rewards points - This is one of the biggest pros to paying your car insurance payments with a credit card. As long as you pay your balance on time, you’ll earn credit card points on money you would have spent regardless, and later you’ll be able to put those rewards points towards travel or other expenses
Convenience - Paying your car insurance payments and other bills with your credit card can help keep all your payments in one place. And if you set up automatic payments, you never risk being late with a car insurance payment
More time to make your car insurance payment - As long as you pay your credit card balance in full and on time, putting your car insurance payments on a credit card is a good way to give yourself a little extra time to pay
There are a few simple risks to look out for if you’re considering putting your car insurance payment on a credit card. Those possible negatives include:
Extra fees - As we mentioned above, your car insurance provider may charge a fee for paying with a credit or debit card. Even if the fee is just a few dollars, that can add up to a significant amount over months or even years, so consider if the convenience is worth any additional fees
Paying interest - If you put your car insurance payment on a credit card and then can’t afford to pay your credit card bill in full, you risk having to pay interest on the bill. And, as we mentioned earlier, credit card interest can be very high, meaning you risk paying much more for the payment then you originally owed
Harm to your credit score - Your credit score includes a factor called your credit utilization ratio. That’s just how much of your total credit limit you use, but if you regularly max out your card, or spend close to your credit limit, it can negatively affect your credit score
If you’re renting a car and already have an auto insurance policy, that coverage will most likely extend to your rental car. However if you don’t already have an insurance policy and you might not need to buy rental car insurance — your credit card company might actually cover you. Some credit card companies offer collision damage waiver coverage, but not liability coverage.
If you charge the cost of your rental car to your credit card you should be able to access coverage through your credit card company. That means if you get into a covered accident or your rental car is stolen, then your credit card company will reimburse you up to a certain limit.
You should contact your credit card company to make sure they offer rental car coverage. Some credit cards that come with rental car insurance include:
Chase Sapphire Preferred and Chase Sapphire Reserve cards
Chase Hyatt and Chase World of Hyatt cards
Chase United Explorer and United MileagePlus cards
Chase Amazon Rewards Visa Signature cards
American Express Green, American Express Gold, and American Express Platinum cards
American Express Hilton Honors and Starwood Preferred Guest cards
American Express Delta SkyMiles cards
Capital One Visa Platinum card
It is not necessarily bad to pay for your car insurance with your credit card, as long as you’re able to pay off your credit card in full and on-time. Missed payments on your credit card can lead to interest on your car insurance, which means you’ll have to pay even more in addition to your premium.
There is no direct correlation between making your car insurance payments and your credit score. If you’re paying for your car insurance with a credit card and you miss a payment, your credit score may be affected (just like missing any payment would affect your credit score), but paying your car insurance with a credit card will not “help” your credit.
You may be able to use a credit card to pay your deductible if your repair shop takes that form of payment. When you file a claim for comprehensive or collision coverage, your deductible is usually paid directly to the auto body shop before your insurance company will cover the remaining repair costs.
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