Most car lenders don't accept credit card payments directly, but you have workarounds
Your car lender almost certainly will not let you swipe a credit card at their payment window or enter it on their website. The reason is straightforward: credit card companies charge merchants a fee (usually 2 to 3 percent) for processing the transaction, and lenders have decided that cost is not worth absorbing. What you can do instead depends on whether you want to pay with a card you already own, or whether you're willing to use a third-party service that accepts cards on your behalf.
The most common workaround is a third-party payment processor — a service that accepts your credit card, takes a fee, and sends the money to your lender as a regular bank transfer. This costs you extra but works. The other option is to use your credit card to get cash or make a transfer to your checking account, then pay your lender the normal way. That also costs money, but sometimes less.
Key Takeaways
- Your car lender's website and phone line will not accept credit card payments, because card companies charge processing fees that lenders refuse to pay.
- Third-party payment processors like Plastiq and Stripe accept credit cards and forward the money to your lender, but charge you a fee of 2 to 3 percent of the payment.
- Using a cash advance from your credit card to pay your car loan costs you a cash advance fee (usually 3 to 5 percent) plus daily interest from the moment you withdraw, making it more expensive than a payment processor.
- Paying with a debit card, bank transfer, or check remains free and is what your lender expects you to do.
- If you are trying to earn credit card rewards on a car payment, the fee you pay usually exceeds the rewards you earn.
How third-party payment processors work
A payment processor is a middleman service that accepts credit cards when the original merchant will not. You visit their website or app, enter your car lender's information and your payment amount, provide your credit card details, and the processor charges your card and sends an ACH transfer (a standard bank-to-bank transfer) to your lender within one to three business days. From your lender's perspective, it looks like a normal bank payment.
Plastiq and Stripe Invoicing are the two most widely used for car payments. Plastiq charges a flat 2.5 percent fee on top of your payment amount. Stripe charges 2.2 percent plus 30 cents. So on a $400 car payment, Plastiq would cost you $10 extra, and Stripe would cost you $9.08. Neither service is affiliated with your lender — you are paying a separate company to move the money on your behalf.
The trade-off is straightforward: you pay a fee to use a credit card instead of a bank account. Whether that makes sense depends on why you want to use the card in the first place. If you are trying to earn rewards points, the fee usually eats most or all of the benefit. If you are short on cash in your checking account and need a few days, it might be worth it.
Why a cash advance costs more than a payment processor
A cash advance is when you withdraw money from your credit card at an ATM or bank, then use that cash to pay your lender. It feels like a direct path, but it is actually the most expensive option. Your credit card company charges you an upfront fee — typically 3 to 5 percent of the amount you withdraw — just for taking the cash out. A $400 withdrawal costs $12 to $20 in fees alone.
On top of that, cash advances do not get the same grace period as regular purchases. Interest starts accruing when ready, usually at a higher rate than your regular card APR. If you withdraw $400 and pay it back in two weeks, you are paying interest for those two weeks even if you normally pay your balance in full. A payment processor charges only the flat fee and nothing more.
The only scenario where a cash advance might make sense is if you have a 0 percent promotional period on cash advances (rare) and you can pay the balance back within that window. Otherwise, use a payment processor if you must use a credit card.
What happens if you try to pay directly with a credit card
If you call your lender's customer service line and ask to pay with a credit card, they will tell you it is not an option. If you try to enter a credit card number on their payment website, the system will reject it — the form is designed to accept only bank account information, debit cards, or checks. Some lenders may offer a credit card option through their website, but this is uncommon and usually only for customers with premium accounts or special circumstances.
The reason is cost. A typical car loan is held by a bank, credit union, or finance company. When a customer pays with a credit card, the card network (Visa, Mastercard, American Express) charges the lender a processing fee. For a $400 payment, that fee is $8 to $12. Lenders have decided it is cheaper to refuse credit cards entirely than to absorb those fees across thousands of customers. They would rather you use a bank transfer, which costs them nothing.
Using a debit card or bank transfer instead
If your lender accepts debit cards, that is a free option. Debit card processing fees are lower than credit card fees, and many lenders absorb them or pass them to the customer as a small flat fee (usually $1 to $3). Check your lender's website to see if debit is listed as a payment method.
A bank transfer or ACH payment is always free and is the method your lender prefers. You provide your account and routing number, and the money moves from your checking account to your lender within one to three business days. This is what most people do, and it costs nothing. If you do not have a checking account, a prepaid debit card linked to a bank account works the same way.
When paying with a credit card actually makes sense
Paying a car payment with a credit card makes sense only in narrow situations. If you are trying to earn rewards points, do the math first. A 2 percent cash-back card sounds good until you subtract the 2.5 percent processor fee — you are paying 0.5 percent to use the card. A 3 percent rewards card breaks even. A 5 percent rewards card (usually limited to specific categories) actually puts you ahead, but car payments are rarely in a bonus category.
The other legitimate reason is cash flow: if you have a credit card with available balance but your checking account is low, and you need a few days to deposit a paycheck, a payment processor lets you make your payment on time without overdrafting. The fee is the cost of that flexibility. Just make sure you pay off the credit card balance quickly — carrying a balance at 15 to 25 percent interest is far more expensive than any processor fee.
Do not use a credit card payment to avoid a late payment. If you are behind on your car loan, contact your lender directly and ask about a payment plan or deferment. A late payment damages your credit score and costs you more in interest than any processor fee would. Your lender would rather work with you than report you to the credit bureaus.
Frequently Asked Questions
Will paying my car payment with a credit card hurt my credit score?
No, as long as the payment goes through on time. Your lender reports the payment to the credit bureaus as a regular on-time payment. What matters to your credit score is whether the payment arrives by the due date, not what method you used to send it. The fee you pay is between you and the payment processor.
Can I use a payment processor to pay other debts, like a mortgage or student loan?
Yes. Plastiq and Stripe work with mortgages, student loans, medical bills, and many other creditors. Check the processor's website to see if your specific lender is listed, or contact your lender to ask if they accept ACH transfers from third parties. Most do.
What if my payment processor sends the money but my lender says they never received it?
This is rare but possible. Keep a record of your payment processor's confirmation number and the date the transfer was sent. If your lender says the payment did not arrive, contact the processor's customer service with your confirmation number. They can trace the transfer and resend it if needed. Do not assume the payment went through without confirmation from both the processor and your lender.
Is there a way to pay my car payment with a credit card for free?
Not directly. Your lender will not accept credit cards. A payment processor always charges a fee. Your only free option is to use a bank transfer, debit card, or check. If you need to use a credit card, the processor fee is unavoidable.
Can I set up automatic credit card payments to my car lender?
No. Your lender's automatic payment system accepts only bank accounts and debit cards. If you want to automate credit card payments, you would need to set up a recurring payment through a third-party processor, which most do not support. You would have to make manual payments each month through the processor's website.