Can I pay my car insurance with a credit card?

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Most auto insurers accept credit cards for premium payments, giving drivers the flexibility to pay online or set up automatic monthly billing. Using a credit card can be appealing if you want to earn points, cash back or travel rewards, or if you prefer not to tie payments directly to your bank account. However, convenience comes with trade-offs. 

Many insurers add processing or transaction fees when you pay with a card, which can offset the value of rewards. And if you don’t pay off your balance in full, interest charges from your credit card company could make your insurance far more expensive than paying by debit or bank transfer.

This guide explains how paying your car insurance with a credit card works, when it might be worth it, and situations where another payment method could be a smarter move.

Should you pay your car insurance with a credit card?

Sometimes paying with a credit card isn’t a preference but a necessity. If your premium is due before your next paycheck and your bank account balance is low, putting the payment on a credit card can keep your policy active and help you avoid a costly lapse in coverage.

For other drivers, it’s not so much a question of money as it is convenience. Using a credit card makes it easy to track and monitor bills, and a cash-back or rewards credit card could put money in your pocket. 

Take Monica, for example. She lives in Texas and pays $150 a month for her auto insurance. By charging the bill to a credit card that earns 2% cash back, she pockets about $36 a year in rewards. But the benefit only adds up if her insurer isn’t tacking on extra fees for paying with a card.

“Almost every (company) is going to let you pay with a card,” says Steven Cegelka, who is chief operating officer for Ignition Dealer Services, which provides customizable financial solutions to car dealers. “Sometimes, there is going to be a convenience fee that’s associated with it.”

If Monica’s insurer charges a 3% convenience fee for paying with a card, then it doesn’t make sense for her to use a 2% cash back card to make payments. Instead, she should pay with her bank or find a credit card that offers a greater level of rewards.

On the flip side, some insurers don’t charge a fee for credit card payments, but they will give a discount for payments made directly from a bank account. If your insurance company’s discount is more than the cash back you earn, then this is another time when it would be better to pay with your bank account.

Monica also needs to be sure she pays off her balance in full each month. Unless she has a 0% APR card, any interest charges on a carried balance could quickly erase her cash back — and if she lets the balance linger, the debt could snowball and cost far more than she saved.

Pros and cons of paying your car insurance premium by credit card

Let’s break it down even further. Here’s a quick look at the pros and cons of paying for your auto insurance with a credit card.

This is just a broad overview of the benefits and drawbacks of using a credit card. Before making a decision for yourself, you should consider your personal situation. Consider the following two scenarios:

• A busy family juggling multiple bills may find using a credit card makes life easier. They set up an auto-pay schedule using their card and then at the end of each month pay off their balance. This gives them one less thing to think about.
• A person preparing to finance a major purchase needs their credit score to be as good as possible to get the best interest rate. So in this case, they avoid paying with a credit card. That’s because adding to their card balance, even temporarily, could increase their credit utilization ratio and drop their score.

“The safest strategy is to use a card responsibly, pay in full to maximize savings, and treat it as a tool for convenience rather than a way to delay costs,” says Howard Goldberg, vice president of customer service at insurer Plymouth Rock Assurance.

How to choose the best credit card for car insurance payments

If you plan to pay for your insurance with a credit card, be sure you are making the most of it by using a card with low fees and robust rewards.

Consider the following when choosing a credit card for insurance payments:

• Annual fee or other costs associated with the card
• Whether the credit limit can comfortably accommodate insurance payments
• Interest rate, particularly if paying annually
• Rewards structure, such as cash back or points
• Welcome offer for new cardholders

Here’s an example based on the terms from two cards currently available.

In the example above, Card A offers more cash back, but Card B might be more appealing because it provides a 0% APR and a more achievable welcome bonus. That 0% APR can be especially valuable if your insurer offers a discount for paying your premiums in a lump sum rather than monthly.

“If you can save 10% to 15%, it’s absolutely worth it,” Cegelka says of paying annually.

Still, the smartest move is to pay your credit card balance in full at the end of every statement cycle. That way, you avoid costly interest charges and make sure any rewards you earn — whether cash back or points — are a true financial gain rather than wiped out by debt. If you can pair responsible card use with perks like cash back or travel rewards, paying your premium with a credit card can work in your favor.

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How the credit card payment process works

Setting up credit card payments can vary by insurer, but it typically involves the following steps:

1. Log in or create an account on your insurer’s website or app
2. Go to the billing section of the site or app
3. Select the option to set up automatic payments
4. Look for a “Pay with Credit Card” option and check for any fees
5. Enter your credit card details
6. Confirm your billing schedule – monthly, biannually or annually
7. Watch for emailed payment notification or receipts and keep for your records

In addition to card processing fees, check for discounts for bank payments or annual payments. If you end up paying an extra $10 a month in processing fees and lost discounts, that equals $120 a year – which could equal a whole month’s premium or more!

If you don’t clearly see fees and discounts on your insurer’s website or app, check their FAQs or call and speak with a customer service representative.

Tips for smart use of card payments for insurance

If you plan to use your credit card for your insurance, follow these tips:

• Use a credit card that provides rewards such as travel points or cash back.
• Always pay off your balance at the end of each month — even if you have a 0% APR card — because you don’t want to build up a large bill you can’t pay off when the promo period ends.
• Select biannual or annual payments if your insurer offers a discount for these and you can pay off the balance before interest begins to accrue.
• Watch your credit usage – if insurance payments will push your balance over 30% of your available credit, it could negatively affect your credit score.

Regardless of how you pay, sign up for your insurer’s autopay feature to avoid lapses in coverage.

Credit cards are a financial tool that can save you money or cost you money, depending on how you use them. Be sure you aren’t maxing out your cards or carrying a balance to reap the rewards of using a credit card while minimizing any financial risk.

Maryalene LaPonsie

 

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Insurance expert Maryalene LaPonsie has been writing professionally for 25 years, with the past decade focused on personal finance -- insurance, investing and retirement. She is a regular contributor to U.S. News & World Report, Forbes Advisor, USA Today Blueprint and Money Talks News.