Can You Pay for Your Auto Insurance with a Credit Card?
Last Updated on April 17, 2021
You need to pay premiums regularly to keep auto insurance active. Most people pay car insurance premiums with a bank transfer, but others pay through a credit card.
Yes, you can pay for car insurance with a credit card. In fact, millions of drivers pay for car insurance with a credit card every year. Most insurers can process credit card payments as easily as bank transfers and other payment methods.
Should you pay for auto insurance with a credit card? What are the advantages of paying premiums with a credit card? Today, we’re answering all your questions about paying for auto insurance with a credit card.
Most Car Insurance Companies Accept Credit Cards
Most auto insurance providers in the United States accept credit cards as a valid method of payment.
Check with your insurer to make sure they accept credit card payments. Most large insurance companies accept credit card payments. However, smaller insurers may not accept credit cards.
Many drivers pay for car insurance premiums with credit cards as a way to earn points. You can earn cash back on qualifying purchases, for example, putting more money into your pocket.
Others like paying with a credit card because of the convenience. Instead of setting up a bank transfer or manually paying bills every month, you can ask your car insurance company to charge your credit card automatically.
Once you have paid for car insurance with a credit card, that car insurance works the same as any other policy. It’s no different than car insurance you bought with a bank transfer or other payment method. Your car insurance company does not care about the method of payment. As long as the payment was successful and the money has reached your insurer, your car insurance should be active.
How to Pay for Car Insurance with a Credit Card
Different insurers have different systems for paying for car insurance with a credit card.
Some insurers require you to call to set up a different payment method.
Other insurers make it easy to add a credit card directly through your online account or mobile app. Just open your account, add a valid credit card, and wait for premiums to go through every month.
Check the following to set up credit card payments with your car insurance:
- Your online account through your insurer’s official website
- Over the phone or through live online chat
- Your insurer’s mobile app (if available)
Some insurers charge an extra fee for credit card payments. Credit card companies charge processing fees, and some insurers pass these fees onto clients. Others absorb the fees.
Some insurers charge fees when paying your monthly premiums with a credit card but waive fees when paying your annual premiums with a credit card. If you pay your premiums annually via credit card, then you might not pay any added fees.
What Happens If I Miss My Credit Card Payment?
If you miss your credit card payment, then that’s a problem between you and your credit card company – like your bank.
As long as the insurer can continue charging your credit card, and as long as payments continue to go through, your car insurance will remain active.
If your credit card is maxed out, or if your insurer is unable to charge your credit card, then your insurer could cancel your policy. Most insurers have a grace period of 7 to 14 days for a missed payment or delayed payment. If you still haven’t paid for car insurance after that grace period, then the insurer could cancel your policy, leaving you uninsured.
Pay your credit card bills on time to avoid any issues with car insurance credit card payments.
Advantages of Paying for Auto Insurance with a Credit Card
Millions of people pay for car insurance every month with a credit card. For some, it’s a smart financial decision and a convenient way to pay their bills.
Some of the advantages of paying for car insurance with a credit card include:
Points & Cashback Rewards: If you have a credit card with points or cash back rewards, then you could earn significant points by paying for car insurance premiums with your credit card. The average car insurance premium in the United States is $1,450 per year. If your credit card gives 3% cash back on qualifying purchases, then you could earn an extra $43.50 just for paying for car insurance with a credit card.
Convenience: Some people find it’s more convenient to pay for car insurance with a credit card. It takes less time. You don’t need to manually set up a bank transfer or pay your bills. Instead, you can pay for your car insurance just like you would pay for anything else with your credit card. You don’t need to worry about missing a bill in your mailbox. You can set up hassle-free electronic payments via credit card.
Instant Transactions: Credit card payments are instant. Instead of waiting a few hours or a few days for a bank transfer, you can send funds to your insurer instantly. The sooner your insurer has your funds, the sooner your car insurance will be activated.
Disadvantages of Paying for Auto Insurance with a Credit Card
Paying for car insurance with a credit card is the right choice for some drivers but not others. Downsides to paying for car insurance with a credit card include:
Fees: Some insurers charge additional fees for paying with a credit card. A credit card company might charge your insurer 2.5% for processing the transaction, for example, and your insurer passes this fee back to you. You might earn 2.5% rewards on your credit card, only to pay an extra 2.5% to process the payment, negating one of the main benefits of using your credit card.
Debt: Managing debt can be tricky. If you struggle with credit card debt, then it may not be a good idea to pay for car insurance with a credit card. Car insurance may not seem like a large expense, but it can add over $1,000 to your annual credit card bill. If your credit card payment is declined due to debt, then your insurer may cancel your car insurance.
Interest Charges: Credit cards charge you interest. If you don’t pay off your credit card in full every month, then your credit card will charge interest. The average credit card charges interest of 20% to 30% per year. It might feel convenient to pay for car insurance with a credit card, but it could cost you hundreds of dollars per year in interest charges.
Credit Score: The more credit you use, the lower your credit score will be. Your credit score includes something called your credit utilization ratio, which is the amount of credit you’re using compared to the amount of credit you have. If you regularly max out your credit cards, then you have a high credit utilization ratio: you’re using most of your credit. Paying for auto insurance could weaken your credit utilization ratio further, lowing your credit score.
Final Word on Paying For Insurance With a Credit Card
Yes, you can pay for car insurance with a credit card. For many drivers, it’s the smart choice.
Most major insurance companies let you pay for car insurance premiums using a credit card. Some charge fees, while others do not.
If you think it’s the right choice, contact your insurer to set up credit card payments for your car insurance policy.