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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.
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 pay off your balance. So what about paying your regular car insurance premiums with a credit card?
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, but most major insurance companies make it possible to do so. Here’s what you need to know if you’re considered putting your car insurance payments on a credit card.
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Most major car insurance companies will give you the option of paying your car insurance premiums with a credit card, and many give you the choice of making your payments online, over the phone or through a mobile app. But before you go ahead and put your monthly payment on your 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. And 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.
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.
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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.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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