Can I Make A Down Payment With A Credit Card?

By Bruce Boswell •  Updated: 12/14/21 •  6 min read
Filed under: Credit Cards

Currently in the market to treat yourself to a new car?

Even though it might not be considered common practice to most shoppers, the good news is that there’s nothing wrong with paying for a car down payment with your credit card (as opposed to another form of payment, that is) but does that mean that it’s a good idea to do so?

Can I Make A Down Payment With A Credit Card

If you’re currently on the fence about whether or not to use your credit card to make a payment, we’re going to be talking you through the potential benefits and drawbacks that might come along with making this choice.

While it might be tempting to use a credit card, you might find yourself having to deal with a costly surcharge, not to mention the commitment of having to make monthly repayments.  

With that being said, it’s important to make sure that you’re able to take on the financial responsibility of using a credit card to make a down payment prior to going through with it, and this is where we come in to lend you a helping hand. 

Whatever your reason for wanting to use a credit card, below, we’re going to be talking you through all of the factors you should consider when it comes to using a credit card, so that you can make the wisest spending decision. Read on.

Making A Down Payment With A Credit Card: Things To Consider

As we have already discussed above, there are no legal limitations as to why you might not be able to use a credit card to make a down payment, though that doesn’t necessarily mean that you should do it.

Prior to making a decision, we strongly recommend that you take into account the following factors:

Make Sure That It’s Within Your Financial Means

First thing first, one of the most important considerations that you should make prior to deciding whether or not to make a down payment on your credit card is whether or not you are going to be able to handle the financial responsibility that comes along with it.

Even though this is something that should go without saying, lots of people can fall into the trap of making an impulsive decision due to the appeal of a credit card, and that can land them in hot water later on. 

For this reason, before you decide to make a down payment using your credit card, we strongly recommend that you first take the time to make a detailed plan of how you plan to go about making the repayments, as this will help you to understand whether or not you’re going to be able to comfortably manage the spending commitment.

It is also very important to make sure that you’re well aware of the terms of your credit card, as well as the interest rates so that you can be sure you’re not going to find yourself paying out way more than you initially intended. 

Ensure That You Have A Sizeable Credit Limit

Next up, the next step that you will need to take when deciding whether or not to make a payment on your credit card is what your credit limit is. In order to even make the down payment from your credit card in the first place, you’ll need to first make sure that you have enough to spend.

Seeing as most down payments are in the thousands, this might mean that you’ll need to request an increase in your credit limit, and so long as you are in good standings with your credit card company you shouldn’t find this to be an issue. 

As a side note, as we have already mentioned, down payments are often quite expensive which means that you might find yourself in the higher percentile of your credit card limit if you decide to use it to make a down payment.

This might cause your credit score to temporarily drop, which is something that you should consider prior to the down payment being made on your credit card.

Check The Credit Terms And Conditions Of  The Dealership

So, after ensuring that you have the means to make the down payment on your credit card and you’d like to go ahead with the purchase, you will then need to ensure that you’re well-versed in the terms and conditions of the dealership you are buying from.

As we have already mentioned above, some dealerships can charge a pretty hefty surcharge alongside the total cost of the down payment (upwards of 5%), and that can lead you to find yourself in a tricky financial situation further down the road.  

Make Sure That Your Lender Has Been Notified 

Before you decide to go ahead with the down payment, we also strongly recommend that you make sure to notify your lender prior to making the payment.

Down Payments are often very expensive, so the last thing that you’ll want to happen is to have your purchase flagged as fraud and declined at the dealership!

Alongside all of that, it’s also deemed as best practice and polite to let your lender know ahead of time that you plan on making a large purchase, as this will help to prevent any delays while also ensuring that your lender is up to speed

Consider Other Options 

Last but not least, making a down payment on your credit card is a major spending decision, so you shouldn’t be afraid to consider alternative options!

While it might feel tempting to make a down payment on your credit card (especially as it won’t be coming directly out of your savings) opting to use a credit card isn’t always the best option.

It’s very easy to overspend with a credit card, so alongside making sure that you are able to take on the financial commitment of a credit card payment, we also recommend that you consider alternative payment routes such as car financing.

Bruce BoswellBruce Boswell

Bruce Boswell

Bruce Boswell enjoys researching and writing about all things related to investing and saving money. Whenever he has a chance, Bruce loves travelling all around the world with his wife and trying new foods.