Pay Car Loan with Credit Card? Avoid Pitfalls Fast (2026)

Facing monthly car loan repayments and wondering if you can use your credit card to manage them? You're not alone. Many Australians are exploring flexible payment options to better manage their finances. Balancing car loans with credit card payments might seem like a convenient solution, but it's important to understand the potential benefits and pitfalls before making such a financial move.

Understanding the Basics

At its core, paying a car loan with a credit card involves using your credit line to cover the loan payments. This approach might be appealing if you're looking to earn reward points or need a temporary cash flow solution. However, it's not always straightforward. Not all lenders allow credit card payments for car loans. Even when they do, there are usually fees involved, which can make this method costly in the long run.

Rates, Requirements, and Options

When considering this strategy, it's crucial to compare interest rates. Car loans typically have lower interest rates, ranging from 6.49% to 12% in 2026, depending on factors like your credit score and the loan term. In contrast, credit cards often have higher rates, averaging around 15% to 22%.

Before proceeding, confirm whether your car loan provider accepts credit card payments. Even among Esteb and Co's panel of 83+ lenders, policies differ significantly. Additionally, check if there are any transaction fees for using a credit card, which can be around 1-3% of the payment amount.

Steps to Pay Your Car Loan with a Credit Card

1. Verify Lender Policies: Contact your car loan lender to confirm if they accept credit card payments and inquire about any associated fees.
2. Assess Your Credit Card Terms: Review your credit card's interest rate, fees, and rewards program to ensure this payment method aligns with your financial goals.
3. Calculate Costs: Compare the cost of paying with a credit card, including fees and potential interest, against the benefits, such as reward points.
4. Set Up Payments: If your lender approves, set up either a one-time or recurring payment through your credit card provider's portal or app.
5. Monitor Balances: Keep an eye on your credit card balance to avoid high-interest debt accumulation, and ensure you have a repayment plan for your credit card bill.

Tips and Considerations

• Use for Short-Term Relief: Consider this option only for short-term financial relief, and ensure you have a plan to pay off your credit card balance promptly to avoid high interest.
• Balance Transfer Offers: If applicable, consider transferring your credit card balance to a card with a 0% introductory interest rate to minimise costs.
• Consult Financial Advisors: Speak with a financial advisor from Esteb and Co to explore other refinancing options that may better suit your needs without incurring high-interest debt.
• Avoid Overreliance: Constantly using your credit card for loan repayments can lead to mounting debt, which can affect your credit score and future borrowing capacity.

Frequently Asked Questions

1. Is it common to pay car loans with a credit card in Australia?
   While not very common, some Australians do use this strategy, particularly for short-term financial management or to earn credit card rewards.
2. Do all lenders allow car loan payments via credit card?
   No, not all lenders allow this form of payment. It's important to check with your specific lender, as rules vary.
3. What are the risks of paying a car loan with a credit card?
   The main risk is accruing high-interest debt on your credit card, which can quickly negate any benefits from rewards or points.
4. Can I earn rewards by paying my car loan with a credit card?
   Yes, if your card offers rewards for payments, but ensure the rewards outweigh any fees or interest charges.
5. How does this affect my credit score?
   Regularly maxing out your credit card can negatively impact your credit score by increasing your credit utilisation ratio.
6. Are there better alternatives to using a credit card for car loan payments?
   Consider refinancing your car loan for lower rates or adjusting your budget to accommodate the loan payments, rather than relying on credit cards.
7. How can Esteb and Co assist with car loans?
   Our team at Esteb and Co can help you explore refinancing options from our network of 83+ lenders to find more cost-effective solutions.