Can You Pay Car Insurance With a Credit Card?

Most car insurers take credit cards. It's worth doing when there's no card fee and you can pay the balance off before interest starts. If either one is uncertain, a lapsed policy costs far more than a missed reward, so pick the payment method that keeps your coverage active.

Why you might want to pay car insurance with a credit card

Earn rewards or cash back

It might be worth using a credit card to pay for car insurance if it means you’ll earn rewards or cash back. Many credit card issuers also have new customer bonuses that promise a cash reward if you spend a certain amount. Using a credit card to pay for your car insurance might help you reach that threshold.

Compare the fee to your rewards before you pay. On a $1,200 premium, a 2.5% fee is $30. At 1.5% cash back, you'd earn $18. That’s a net loss of $12.

Manage cash flow

Say your car insurance premium is due tomorrow and payday is four days away. Charging the premium bridges the gap, and paying in full by your statement’s due date means it costs nothing in interest.

That only works if you’re not already carrying a balance, because the interest-free grace period on new purchases depends on paying your balance in full. If last month’s premium is still on the card, interest on the premium starts the day you charge it.

In this situation, you could pay your car insurance bill with your credit card on the due date. Once you get paid, you can pay off the credit card balance.

Keep a rarely used card active

Insurers generally don’t report premium payments to the credit bureaus. Paying by card won’t change that. But the card itself reports, including your balance, your limit, and whether you paid on time. And payment history is 35% of your FICO Score.

Putting your premium on a card can give a card you rarely use some activity. And when you make payments toward card balances, those payments are reported.

Read more >> How to Lower Your Car Insurance

To autopay or not to autopay
‍Autopay protects you from forgetting a payment, but it doesn't protect you from a card that changes. If yours expires or gets replaced after fraud, autopay stops working, and a missed premium can put your coverage at risk before you notice.

When you get a new card, update your insurer the same day. And check whether they email you when a payment fails, because some don't.

Downsides of paying car insurance with a credit card

Card payment fees

Some insurers add a fee when you pay by card. Check the payment page in your insurer's app or website, or your billing statement, before you pay. Compare that fee with what paying from your bank account would cost.

Interest charges if you carry a balance

If you can’t pay off the card by its due date, interest can cancel out any rewards. Credit cards carry some of the highest interest rates in consumer lending at an average 22.15%, and the interest keeps adding up for as long as the premium is on your card.

Higher credit utilization

Your credit utilization is how much of your available credit you’re using. A $1,200 premium on a card with a $2,000 limit uses 60% of it. Amounts owed, which includes utilization, makes up 30% of your FICO Score, second only to payment history. And people with excellent credit tend to have utilization in the low single digits.

Paying the premium off before your statement due date keeps most of it off your credit report.

Read more >> How Your Credit Score Impacts Your Car Insurance Rates

‍Call your insurer before the due date, not after. If putting it on a card isn’t an option, call your insurer to ask about alternatives. Insurers can often move your due date, split the premium into smaller installments, or switch you to a different payment schedule.

Then ask how long your grace period is before a missed payment cancels the policy. Most states require notice before cancellation, and knowing the actual date is better than guessing. A lapse in coverage costs more than a late fee, because it can increase what you pay for your next policy.

Bottom line

You can pay car insurance with a credit card, and it makes sense when there's no card fee and you'll pay the balance before interest starts. If either is uncertain, paying from your bank account is the safer way to keep your policy active.

Whichever way you pay, the premium itself never reaches your credit report. What does show up is how much of your available credit you're using, and a premium on a card can push that number up. Kikoff's Credit Account is an account in your name that reports to Equifax, Experian, and TransUnion. Plans start at $5 a month with no credit check to sign up.

Run the numbers >> Not sure your premium is competitive? Use Kikoff's auto insurance calculator to see what coverage like yours typically costs.