Thursday, September 14, 2006

Should I put a car on my credit card?

This was something I was pondering last night. I just interviewed for a new job which I think I'll accept if offered - but I'd have to buy a car as it's about 20 minutes from where I live and isn't bus-able. I'm thinking I can easily afford something in the $5-7k range, plus insurance costs.. and it occurs to me that I've got a bounty of credit card checks, I wonder if I should just write myself a balance transfer check and pay "cash" for the car?

This seems good to me for three reasons. One, I can get a very competitive interest rate (Chase doesn't have the fixed 3.99% right now, but I can get 5.99% anytime and they'll deposit the money into my bank account) or perhaps even 0% interest (I still have 0% checks for MBNA, I'll call them up and see if they'd raise my credit line $7,000.) I know if I do the 0% option I'll have to switch it in a year, but I'd have saved a whole lot of money. The second reason it seems good is that the credit card debt is unsecured - ie so if something bad happens and I can't pay the cards, my car won't be repossessed because the two aren't connected. Third, if bad things happen, credit cards have somewhat lower minimum payments than the regular four-year personal loan payment on a car loan, especially at 0% - and I imagine it'll be easier to work things out with the credit card company than a lender.

I'll have to see what I can do with my cards - I can still get a 7% rate from the credit union which isn't too bad.

9 comments:

D said...

Ok, if your going to jump I guess I can push. LOL

If you decide to use your credit cards - don't use one of their checks or a balance transfer unless you can do it free. Why?

Most credit cards are accepted at most dealers. Are you using a dealer? They don't care what card you use and from past experience when you tell them you don't need financing, you can negotiate a better deal.

If you have a 0% and no fee go for it. Worse comes to worse you transfer it when a better deal comes along. Just make sure rates are always lower than what you could get fixed.

Good Luck!

Then Things said...

First off have you considered other things besides buying a car? Even if you're able to pay cash for a car gas and insurance are high monthly costs you can count on for the life of your car. Would biking be an option? Or riding a bike to a bus/train stop if the whole ride is too far? Another option is a moped- they are much cheaper than cars and take very little gas. Just a few things to consider! And congrats on the interview going well!

Kira said...

Unfortunately the place is about fifteen miles away and pretty much out in the sticks and requires highway driving to get there, so I don't think a moped would work.. =) In the suburbs around my city, the popular thing are park and ride stops - so I could ride a bus into the general area, but I'd need a car to actually get to my work.

Bob said...

Think about paying cash for an older model civic in the $2000 range, get some cheap liability insurance and put the money you would have used for payments into a high yield savings account. This way, instead of paying someone 5.99% to use their money, you are getting 5+ percent for your own money and saving to pay cash for another car down the road.

In my opinion, debt on a depreciating asset such as an automobile, is bad debt. I always avoid this type of debt. It is a wealth killer.

Kira said...

If I had $2000 in cash I might do that. ;) I'm seeing a lot of good looking cars under $5k though.

prlinkbiz said...

Hey girl- do you have any friends or family who will lend you the cash to get a car? There are lots of great cars under $5k- whether you buy and sell, or just drive it until you are ready for whatever is next.

Justin said...

One thing you aren't considering is the effect a loan will have on your credit report. It's my impression that a "loan" looks a lot better on a credit report than credit card debt (can anyone confirm that, or am I making it up.) Additionally, when you go to buy a condo or home I would think the bank would want to see some loan history. Car loans are often seen as stepping stones to mortgages. And you won't be able to put a house on a credit card. Least not in most areas of the country!

Karen said...

I don't see any sense in paying high interest rates. You will certainly face this problem and then will be in a more difficult situation than you are now.

Will Philip said...

Well, it might be worth a try. What I did before was almost the same as what you’ve planned. I go for cheaper cars, hehehe… Then I used my credit card upon purchasing, and I just worked hard to earn. I worked part-time jobs. I also had a small business with my sister. That decision became a sort of motivation for me to earn more. =) Well, I’m looking forward to seeing what car you picked. Good luck!