Can I pay for car insurance with a credit card?
Yes, you can generally pay for your car insurance with a credit card. Doing so may lead to benefits like cash back or other credit card perks. Due to the prevalence of insurance apps and e-commerce, paying for insurance with a credit card is commonplace. However, there may be some risks involved, depending on your situation.
What are the advantages of paying for car insurance by credit card?
- Flexibility: Your credit card bill will be due at the same time every month, so the funds for anything you purchase with your credit card won't come out of your bank account until you pay your bill.
- Reward program benefits: Some credit cards offer cash back or other rewards, and using a credit card to pay for car insurance can help you earn those rewards. This may be worthwhile, as long as you make your monthly credit card payments on time.
- Discounts: Many insurance companies offer an auto insurance discount for paying your entire policy upfront or via an automated payment and using a credit card might make that possible for you.
- Automated payments: If you make monthly payments, you can set up autopay to have your car insurance premium automatically charged to your credit card each month so you don't have to manually pay it.
What are the disadvantages of paying for car insurance by credit card?
- Damaged credit score: If you already use more than 10% of the credit limit available to you, you might avoid adding your car insurance bill to your credit card usage. According to Experian, if your credit utilization is above 30% of your credit limit, it can have a serious negative affect on your credit score.
- High interest rates: Avoid using your credit card to pay for car insurance if you can't pay the credit card balance in full each month. If you don't pay off your credit card, your debt and interest charges can quickly grow. Many credit cards allow you to set up autopay so you don't miss a credit card payment.
- Additional fees: If your insurance company charges a fee to pay with a credit card, the benefits of using your credit card to pay for car insurance may not outweigh the fees involved.
What other car insurance payment options are available?
If you decide not to pay your insurance premium by credit card, you can usually pay online with a debit card, which is like paying by check but faster. Depending on your insurer and situation, other online payment methods include texting, PayPal, electronic funds transfer (EFT), and online checks. And, of course, you can always make your payments over the phone.
If you don't want to pay electronically, you can mail in a physical check or money order.
How often do you pay car insurance?
You can pay for car insurance monthly or for your full term (usually six or 12 months, depending on your insurer). Some insurers, including Progressive, offer a car insurance discount when you pay your policy in full.
Can you set up autopay for car insurance?
Yes, you can enroll in autopay for your car insurance premiums through Progressive and many other insurers. Signing up for autopay may also qualify you for a discount.
If you use autopay for your credit card bill or car insurance bill, make sure enough funds are in your connected bank account before your payment is scheduled to be withdrawn. Otherwise, you could overdraw your bank account, be responsible for overdraft fees and potentially cause a late insurance payment.
What's the best way to pay my car insurance premium?
The best way to pay your premium is whichever method keeps you on track so you don't have a lapse in car insurance coverage. Nearly all major insurance providers now allow you to pay your insurance premium by credit card, debit card, electronic check, or electronic funds transfer (EFT), all of which may provide the benefit of automation.
What's the difference between paying for car insurance with a credit card vs. a debit card?
Paying for car insurance with a debit card or credit card works similarly, but credit cards are riskier than debit cards, especially if you don't pay your credit card bill on time.
When you use a debit card, money is taken directly from your associated checking or savings account, like how a check works. When you use a credit card, the credit company pays your insurance bill, and you reimburse them later via your credit card payment. If you don't pay off your credit card balance when it's due, the money you owe will accrue interest that you'll owe to the creditor on top of your original bill.
Is paying for car insurance with a credit card right for me?
That depends on your spending habits and your financial situation. If you have good credit and can pay your credit card bill in full monthly, paying your car insurance premium with a credit card can be a simple, automated option with added credit card perks.
On the other hand, if you can't pay your credit card bill in full and on time, using it for your car insurance will end up costing you more, with potentially long-term repercussions for your credit score and debt profile. Also, if you're applying for a loan or making a purchase that requires a credit check, you may want to consider another payment method for now; using more of your available credit could negatively affect your credit score.