Car insurance premiums: Can you pay for them with a credit card? What you need to know

Paying for car insurance is never anyone’s favorite pastime, especially considering car insurance premiums are expected to rise 4% or more by the end of 2025, according to Insurify. The good news is that using a credit card to pay for your auto insurance can help ease the pain caused by premiums that seem to rise every year. Choosing the right payment method, such as a credit card with cash back rewards or a points boost, can help you save money and earn rewards on your car insurance payments.

Paying with a credit card, rather than by ACH, check, or debit card, offers several advantages. These include earning rewards based on your spending and the benefit of your card’s grace period, which can help manage cash flow. Additionally, some insurance companies accept electronic funds transfer (EFT) and bank transfers as alternative payment methods, potentially providing more flexibility or lower service fees.

Let’s explore the various perks of making payments with a card, as well as potential drawbacks. The goal here is simple- to take full financial advantage of using your card by doing so in a savvy manner.

Can you pay for car insurance with a credit card?

A common question I’ve heard over the years is, “Can I pay my car insurance with a credit card?” The short answer is usually yes, according to Jason Steele, a nationally recognized expert on credit card rewards.

Over the past decade or two, the option to pay by credit card has become increasingly common among insurance companies. While many insurers and auto insurance providers accept credit card payments, it’s important to verify the payment options and policies with your specific insurance company.

Steele warns that if your card is going to charge you an additional “processing” or “convenience” fee (sometimes referred to as a surcharge) for using this payment option, you may want to avoid it.

Megan Daniels, a travel writer and founder of JourneyCurrencies.com, adds that the fee depends on who you have your insurance with and how you pay.

She explains that some consumers see what looks like a card processing fee, but it is often related to payment frequency. Monthly payments can often be made with debit cards or directly from a checking account, but you should ensure you have sufficient funds to avoid overdraft or declined payments. Monthly insurance payments, whether by ACH or card, can include a small charge. If you can pay annually (prepay for the year), you may be able to avoid that fee by paying your car insurance bill in a lump sum as an alternative to monthly payments.

When does it make sense to use a credit card to pay for car insurance?

Paying for your insurance can be a smart financial move…if the following conditions are met:

• You are sticking closely to your monthly budget and paying your card balances in full each month… and thus avoiding interest or finance charges. This helps you manage your money responsibly and stay on track with your financial goals.
• If you want to improve your cash flow by taking advantage of your card’s grace period, this will give you more time to pay your bill and can be a convenient option for managing large expenses like car insurance.
• You are avoiding additional fees as noted above.
• One exception that might justify paying a fee is if your card offers rewards that can completely offset the fee. An example that Steele points out is if you get a new card and paying your premium helps you reach the minimum spending requirement necessary to earn a large new account bonus. Insurance premium payments may count as eligible purchases toward these offers, so using your card for this purchase can help you unlock valuable rewards.

BONUS TIP!

Setting up automatic payments for your car insurance can save time and stamps, help you manage your money more efficiently, and also help ensure that you’re never late on your premium.

In addition, doing so can help you earn more rewards for recurring costs that are already a part of your normal monthly budget. Paying for large expenses like car insurance with a credit card can be a convenient option to help you earn rewards and work toward your financial goals. Simply put, Daniels notes that “this softens the sting of a big bill by giving you a small bonus for something you have to pay anyway.”

When to avoid making car insurance payments with a credit card

You should avoid paying for your insurance with a card if any of the following circumstances apply:

• You are seeking to extend the time to make your insurance payment (beyond your card’s grace period) and will incur interest charges as a result. High interest rates can quickly add up if you carry a credit card balance, so it is important to pay your credit card bill in full by the due date to avoid these extra costs.
• Your insurance company adds fees that outweigh the rewards offered by your card. Please note that this scenario is more often the case than not, since such fees are often higher than 2% and most rewards cards offer 2% cash back or less on general purchases.
• Doing so causes you to exceed your monthly budget. You should be very disciplined, as stats show that consumers spend more with cards than ACH, cash or checks.

BONUS TIP!

Paying your car insurance monthly (or annually) with a credit card can help you build credit as such payments are typically reported to the three major credit bureaus. However, late payments on your car insurance or credit card can negatively affect your credit report and result in a lower credit score, which can have a credit score impact on your insurance premiums. On a related note, a high credit score can result in lower insurance premiums.

Choosing the best credit card for paying car insurance premiums

When selecting a credit card to pay your car insurance premiums, it’s important to consider the rewards structure of your card. Many cards that offer high rewards rates—such as 5% or 6% cash back—typically restrict these bonuses to specific categories like grocery stores, streaming services, or travel purchases. Since car insurance payments don’t usually fall into these categories, these high-category rewards cards may not maximize your earnings on insurance premiums.

Instead, a flat-rate rewards card or one that offers an elevated rewards rate on all other purchases outside of specific categories is often the best choice for paying for car insurance. These cards provide consistent rewards on every dollar spent, including insurance premiums, without the need to worry about category restrictions or caps.

For example, the Capital One Venture X Rewards Credit Card earns 2x miles on all purchases, making it a strong option for paying car insurance premiums. If your insurer does not charge any additional fees for credit card payments, using a card like this can help you earn valuable rewards on an expense you would incur regardless.

Ultimately, choosing a card with a straightforward and generous rewards rate on general spending can help you make the most of your car insurance payments while avoiding unnecessary fees or complicated category restrictions.

Final thoughts, smart tips for using a credit card for car insurance responsibly

In conclusion, using a card to pay for your insurance bill can be a smart way to take advantage of credit card benefits and maximize your rewards.

However, there are definite pitfalls to avoid, and it’s essential to carefully weigh the pros and cons based on your unique financial situation.

Here are a few final tips to consider:

• A card makes paying for insurance easier and safer, while helping you track your spending since most cards automatically categorize your spending.
• Using a credit card responsibly to pay your auto insurance premiums can help with building credit, as long as you pay your balance in full and on time.
• Make sure you understand your car insurance policy and the coverage it provides; your insurance provider or insurance providers can clarify any questions about your policy details.
• Some auto insurance companies may offer discounts for paying premiums directly from a bank account or savings account, so check with your insurance provider to find the best payment options for your needs.
• Use your card as a tool, not a trap. Pay in full, watch for fees, and let it earn for you, not against you.