Adam from Tallahassee, FL asks, “can I pay my monthly car insurance bill with my credit card?”
Car insurance is unfortunately one of those facts of life that there’s just no getting around. If you want to drive, you need to take out car insurance and it’s just that simple.
This is what protects other cars on the road and other homeowners from any destruction that you might cause after all, so it’s only fair that you can’t just opt to go without.
But just because car insurance is non-negotiable, that doesn’t mean that there aren’t smarter ways of paying it and ways that you can save yourself money.
For instance, you might want to consider paying your insurance by credit card, rather than by debit card or by direct debit.
So how does this help? And what’s so useful about it?
Most of us will assume that the only way to pay our car insurance is in 12 monthly installments. This is also how we pay most of our other bills and as such, we don’t really question it or look for other options.
But as far as your insurers are concerned, your paying monthly is a privilege and not a right. This is something that benefits you, to their detriment. And as such, they can charge you extra for it – as much as 10.75% extra on the total price!
That’s no small amount as you might have noticed and what’s cheeky is that you were probably never told about that extra or given the option to pay in any other way.
But if you’re savvy, you can speak with your insurer and find out if you can pay in a single lump sum.
So now you’re paying a single lump right at the start as a single annual payment. Now, you won’t be charged any extra by your car insurance company and as such because there’s no risk involved for them – they know they’re going to get the full amount.
The only issue? Two words: cash & flow.
Many of us choose to pay in installments whenever possible because it feels like we aren’t spending so much and because it lets us defer the painful part.
But the good news is that you can still do that. The trick is just to put that single cost onto a credit card but to choose one that has a generous interest-free period. Many credit card companies offer this as a way to try and entice you over and this is a trick that lots of money-smart individuals use to their advantage.
So now you pay off your entire year’s car insurance on your credit card and then pay off the premium in 12 monthly installments. But because you’re on an interest free credit card, you won’t pay a single penny in interest and you’ll be able to keep the total amount for the insurance lower.
The only caveat is that you absolutely must pay everything off before the end of your interest-free period. Otherwise, you’ll start being hit by much higher interest that even the insurer would have charged! If you have the discipline, then this is a viable option to consider.
The other question you might be wondering is what you’re going to do next year once your credit card’s free period is over.
The answer is simple: change credit cards! You can actually do this even mid-way through your repayment by transferring your debt and that way you can be almost perpetually at zero percent interest.
Finally, it’s still useful of course to look around and to compare different insurance providers. Surveys show that simply taking the time to compare the different rates provided by different insurers can save you up to 5.34% on the overall price.
Of course there are other things you can do to make your insurance cheaper too – like looking after your car and protecting any no-claims bonus that you might have. The moral of the story is that if you’re careful and savvy, you can save a lot of money. And that’s what we’re all about.
And if you were wondering whether you can use a credit card to pay off monthly installments, then sure, there’s no reason you can’t do that too!