Paying your car insurance by credit card can be a good idea or a bad one depending on your financial situation. In this case, money’s tight and your car insurance is due. But you have a shiny new credit card that just came in the mail and it’s all ready to be broken in and rack up points. Or, maybe you have an existing credit card that still has some room on it. Question is…what should you do? The tiny voice in your right ear says, “don’t do it”, while the one in your left ear urges, “go ahead…how bad can it be?”
Well, let’s find out by examining the pros and cons of using a credit card to pay for your car insurance. The convenience of credit cards to pay for just about anything on the spot goes without saying. However, the temptation to impulsively buy something that catches your eye, but you may not actually need, can lead to disaster if you’re not careful. Use common sense if you choose to use a credit card to pay certain bills such as utility, phone, and car insurance.
Being late paying your bills is never a good way to go. That’s why, if you have access to a credit card with a high limit, low balance, and low interest rate, you may want to consider setting up an automatic bill pay option. This is a pro. But, let’s not forget, you have to pay the bank card company back for the privilege and ease of using their credit card. And, keep a close eye on those card statements as they come in. The last thing you want to do is over-use a particular card and be unaware the balance is suddenly increased and you can’t afford to make the payments.
Unfortunately, this happens quite often. You have all your bills pile up every month on that one credit card and you’re only paying the minimum amount due. Do this for a few consecutive months and the credit card company, at their discretion, can decide to raise your interest rate. Because on a high balance the interest compounds on what you owe rather quickly, both the balance and monthly payments will continue to rise accordingly. This is definitely a con.
If your financial situation permits you to pay your entire car insurance premium upfront rather than spreading it over the course of six months, then do so. Just remember you’ll actually be doing this twice a year. Is it worth it for you to charge that large an amount every six months? Will it create a stressful situation? If you don’t want to max out your credit card, you may want to use Option B, which is to spread your payments out. Have your car insurance company bill your credit card each month to help make the card payments more manageable. Either way, if your card accumulates reward points, you‘ll benefit.
Whatever you do, don’t spend beyond your means. If paying your car insurance with a credit card is something that will cause you credit problems in the long run, avoid doing it. The immediate convenience isn’t worth it. Evaluate your particular situation. What may be right for someone else may not be right for you. So, weigh your decision carefully. Picking the right car insurance can be difficult as well. Why not get a free car insurance quote today?
Have you ever paid your car insurance with a credit card? Feel free to share your thoughts in the comments section below.