What can I pay with a credit card?
Can you buy a car with a credit card?
Can you pay a credit card with a credit card?
Can you buy a money order with a credit card?
Can you buy gift cards with a credit card?
Can you pay rent with a credit card?
Can you pay taxes or the IRS with a credit card?
Can you pay your mortgage with a credit card?
Do mortgage lenders accept credit cards for monthly mortgage payments?
Can you buy bitcoin or other crypto with a credit card?
More than 170 million Americans have at least one credit card, with most carrying more than one to finance their everyday expenses or pay off their monthly bills.
Credit cards can be one of the best tools to establish your credit history. When used responsibly, paying with plastic can be a straightforward way to boost your credit score, earn rewards, and keep track of your expenses without taking on extra debt.
“Responsible behavior is always something that all consumers take. Make sure that you are deliberate about the control that you have on purchases and paying back,” Krista Phillips, EVP, head of Branded Cards and Marketing at Wells Fargo, told Yahoo Finance. “I don’t know that we would outright say there are purchases that I wouldn’t put on a credit card, [but] it comes back to responsibility and control about how you manage day-to-day expenses.”
Before you swipe that card, consider how this purchase or payment will affect your creditworthiness and how much it will cost in fees or interest. Here’s what to know.
Can you buy a car with a credit card?
The short answer is yes: you can purchase a car with a credit card, but the decision will be up to your car dealership. If your dealer accepts credit cards, they may let you use it to pay for a portion of the down payment on your vehicle’s purchase. But just because you can use plastic, doesn’t mean you should in this case.
Paying for a car with your credit card will likely code as a cash advance with your bank. That means you’ll take on much higher interest rates, which you’ll owe from the day of the transaction and will accrue immediately. There’s no one-month grace period like regular credit card transactions. For some banks, a cash advance’s interest rate can be as high as 29%.
Additionally, credit cards often have variable interest rates that are much higher than those tied to a new car loan. According to the Federal Reserve, the average APR for a 60-month new car loan averaged 4.85% as of June 2022, compared with a 14.6% APR for credit cards.
Putting a car payment on a credit card may also risk maxing out your credit limit, which could hurt your credit score and potentially trigger an over-the-limit penalty fee.
Generally, dealerships accept other forms of payment, including money orders, cash, personal checks, cashier’s checks, and electronic transfers in lieu of a credit card. Other alternatives to using a credit card include financing your car, trading in a car, or getting a co-signer.
What you should consider:
You may exceed your credit card limit.
A high credit card utilization could hurt your credit score.
Credit cards often have higher interest rates than car loans.
Fees could outweigh any rewards you earn.
Can you pay a credit card with a credit card?
Paying off the balance on one of your credit cards with another credit card is possible, but not often recommended. Credit card companies and banks don’t accept credit cards as a viable form of payment. Acceptable forms of payment are generally made via check, money order or electronic bank transfers.
But there’s one caveat. Some folks use a balance transfer credit card to pay one credit card’s balance with another.
With a 0% balance transfer card, you can move a credit balance to one with a lower interest rate. Still, if the transferred debt is not paid in full before the introductory 0% offer expires, the debt will be subject to the card’s regular APR which could be higher than the card you’re originally transferring the debt from.
“When you make a balance transfer you need to know the terms of the contract,” Rod Griffin, senior director of public education and advocacy for Experian, told Yahoo Finance. “If you’re transferring an amount that maxes out that balance [your new card allows] it could affect your credit score negatively because you have now potentially a higher utilization rate on this new account than you did on your previous one.”
“A balance transfer may help, but it can also get people into more trouble,” Griffin added. “You have to know yourself and if you’re tempted to use a card just because you have an available balance, it may not be the best thing for you.”
What you should consider:
A balance transfer can consolidate your debt.
You may qualify for a 0% introductory interest offer.
A transfer could lower credit utilization.
Balance transfers come with a fee.
The 0% introductory period will expire.
You could end up with more debt.
Can you buy a money order with a credit card?
To request a money order, you’ll need to provide the funds through a debit card, electronic transfer, personal check or cash. Currently, there are no providers that accept direct credit card payments as a viable form of payment for a money order.
If a credit card is your only option to fund a money order, you’ll first have to obtain a cash advance from the card at an ATM or your bank. A cash advance is a loan from your credit card’s line of credit and comes with additional fees and a higher interest rate.
Additionally, cash advances usually don’t have an interest-rate grace period. That means that the higher APR tied to the cash advance will start accruing from the day of the transaction.
What you should consider:
Money orders can’t be paid with a credit card.
You’ll need to get a cash advance to fund a money order.
Cash advances have no grace periods.
Can you buy gift cards with a credit card?
Yes, you can purchase a gift card with a credit card, but the decision may be up to the merchant you’re buying it from. Most large retailers don’t have a problem accepting plastic as a viable form of payment.
One factor to consider is that some credit card companies may not let you earn rewards or points for gift card purchase. This will often be specified in the fine print.
Before purchasing a gift card, you should also check if it will be charged as a cash advance. Some gift cards, such as a prepaid card, may code as a cash advance, which will trigger a higher interest rate and fees.
What you should consider:
Most large retailers accept credit cards for gift card purchases.
You could be eligible for cash back or rewards.
You may not be eligible for rewards.
The purchase could be treated as a cash advance.
Can you pay rent with a credit card?
Paying your monthly rent with a credit card is possible and potentially convenient — if your landlord allows it — but it may not be in your best interest to do so long term. If you charge your rent on a credit card, your landlords may ask you to cover the transaction fee.
The processing fee can average between 2.5% and 5% and can quickly add up. For instance, a 2.5% fee on a $2,000 rent can tack on an extra $50 each time you use your credit card to pay your monthly bill. That’s an additional $600 per year over your rent, which could dwarf any rewards you earn during that time.
What you should consider:
You may have to pay processing fees.
Some landlords won’t accept this form of payment.
You may earn minimal rewards because of the transaction fee.
Can you pay taxes or the IRS with a credit card?
Yes, you can pay taxes with a credit card, but you’ll have to pay a fee.
The Internal Revenue Service has contracted three third-party payment processors for payments made by debit and credit cards. They each charge a fee, currently ranging between 1.87% and 1.98% to process your payment. That means even if you’re charging your tax bill to collect reward points — with the plan to pay off the charge before the grace period ends — the fee to pay by credit card eats into the value of the rewards you would collect.
Still, you should think twice before charging your taxes on your credit card. According to experts, the last thing you want to do is take on more debt than you already have.
According to Eric Bronnenkant CPA, CFP, head of tax at Betterment, paying with a credit card can be costly as the “choice usually incurs a fee of about 2% plus a typically higher rate of interest between 10% and 25%.”
If you can’t pay your tax bill, the IRS provides payment plans that you can apply for to help you make your payments on your own time. As a government agency, the IRS also has more forgiving interest rates than credit card issuers.
“For individuals who are in a financially precarious position, the first option is to set up a payment plan with the IRS which charges a modest fee (up to $130 but sometimes waivable) and a modest rate of interest of 5% [or less],” Bronnenkant said. “This strategy typically is the lowest cost of financing available.”
Keep in mind that that interest will continue to accrue until the debt is paid off. Furthermore, your interest rate is subject to change on a quarterly basis.
Still, that’s not to say that in some cases, paying your IRS debt with a credit card may be in your best interest.
“Some credit cards may have an offer of low or no interest for a period of time of 12 months, which may effectively be a more attractive option than the IRS installment plan even considering the ~2% fee,” said Bronnenkant.
Payments accepted by IRS:
Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE; PayPal, Click to Pay; Pay With Cash, Accel, AFFN, Cirrus, Interlink, Jeanie, Shazam, Maestro.
What you should consider:
Credit cards have higher interest rates than the IRS.
The IRS offers payment plans.
Rewards will be minimal compared to fees.
Can you pay your mortgage with a credit card?
If you’re in the market to buy a home or a property, you won’t be able to use a credit card to front the costs of a down payment or purchase. That’s because mortgage lenders don’t accept direct payments from credit cards or cash advances from a line of credit because it's an unsecured payment method.
“Unsecured borrowings, not secured by any kind of assets are not eligible for the down payment of a purchase in the home,” Jeffrey Ruben, president of WSFS Mortgage, told Yahoo Money “A credit card or cash advance in effect are unsecured as a result are not permitted as a good source of funds.”
According to Ruben, if you have an investment account in CD stocks or bonds, for example, that can be used as collateral for a loan to purchase a house because it’s secured by those assets.
Do mortgage lenders accept credit cards for monthly mortgage payments?
If you’ve already purchased your home and want to pay your monthly mortgage payment with a credit card, that may also not be in your best interest.
For one, putting a mortgage payment on your credit card can affect your credit utilization ratio – the percentage of your available credit that you use. According to FICO, your credit utilization influences up to 30% of your credit score. If you use too much of your credit card’s limit, that can hurt your credit score because it will lower your credit utilization ratio.
Second, mortgage servicers don’t accept direct payments with a credit card. That means you’ll have to find a third-party payment provider that will accept your credit card and set up the payment with your mortgage lender. This can end up being costly since you’ll incur extra fees and terms.
This will also raise a red flag to your mortgage servicer, as it may signal that you’re finding it difficult to make payments.
“It's a bad long-term plan for borrowers to do that,” Ruben said “Paying with a credit card is usually an early warning sign of financial difficulty. Their credit score is gonna get hit. It's probably a pretty good indication that financial distress is about to happen or his house already happened. So yeah, it's not a good plan.”
What you should consider:
Mortgage services don’t accept direct credit card payments under any circumstances.
Paying with a credit card may signal financial distress to your lender.
You may exceed your credit limit.
The practice could hurt your credit score long term.
Can you buy bitcoin or other crypto with a credit card?
Whether you can purchase crypto with a credit card will depend on your credit card issuer and the crypto exchange you want to transact with.
If the crypto exchange you want to purchase crypto from accepts credit cards, you should still think twice. Most large credit card issuers will allow you to buy crypto with a credit card, but will code the transaction as a cash advance. Not only does a cash advance mean you’ll take on higher fees immediately, but you’ll also have to pay fees for the crypto exchange.
Keep in mind that cash advances do not have a grace period and have rates that are much higher than your current APR. Depending on your bank, a cash advance interest rate can range from 18% to over 28% and will be charged from the day of your transaction.
Another factor to keep in mind is that crypto is volatile. If you purchase crypto with a credit card and your investment loses its value before you pay off your credit debt, you end up with an asset that is worth less than your debt, which is also accruing interest.
The best way to purchase crypto through a secure source of funds such as a debit card or ACH transfer.
What you should consider:
You could earn rewards
Crypto is volatile.
The transaction could be treated as a cash advance.
You could pay more in fees.
In a nutshell
You can use your credit card to pay for or buy many items, but that doesn’t mean you should. Its convenience comes at a price. Make sure to know when your payment is treated as a cash advance, what fees you’ll incur, and how your credit score may be affected when using your credit card to pay for bills or buy certain items. When using rewards, also consider the bigger picture as large expenses may shrink any benefits you receive. Finally, always consider less expensive options before pulling out of the plastic.
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.
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