When Chris Mixter, a 39-year-old IT consultant living in Virginia, was ready to buy a car, he decided to try to get a free vacation out of it, too.
His idea: Put the car on a rewards credit card, just to get the rewards points. He had some experience racking up points: He and his wife had previously financed entire trips with points, including their honeymoon in Aruba and two family trips to Disney World. This would be the biggest purchase yet, though. Before this, he’d never put “anything bigger than a refrigerator” on a credit card, Mixter said.
It’s possible to put large purchases on a credit card, as long as you have a high enough credit limit, but merchants sometimes charge a fee for doing that. Some people put taxes on their credit card, for example (for a fee), and it’s also possible to pay for rent and school tuition on a card, though there is often a fee for that, too. An art collector in 2015 put a Modigliani painting worth $170.4 million on his American Express
Sometimes figuring out the finer points of putting large purchases on a credit card takes significant time and energy; “It might end up being more hassle than it’s worth,” said Matt Schulz, a senior industry expert at the credit card website CreditCards.com.
Generally, consumers shouldn’t put such large purchases on a card if they can’t pay it off in the first month, because of how much the purchase will end up costing months or years later with the annual percentage rate (APR) factored in. Mixter had to scramble after he made his purchase because he didn’t have the cash to immediately pay it off. Also, he could have done more to maximize his rewards points with the purchase.
Here is how Mixter made the purchase — followed by some suggestions on what he could have done differently:
How he did it
Mixter wanted to put the entire purchase of a 2018 Honda Odyssey minivan on his United MileagePlus Explorer credit card
, which he uses for almost every purchase he makes.
The card offers two United miles for every $1 spent on tickets purchased from United and one mile for every $1 spent on everything else. So, Mixter figured, he could get about 45,000 points for the purchase of the car, which would cost $45,000 including its extended warranty.
United miles are currently valued at 1.5 cents per mile, meaning Mixter would get about $675 to spend from the purchase.
He uses only two credit cards for most purchases, he said, and the other card, a Starwood Preferred Guest American Express card, would not increase his spending limit enough to accommodate the purchase.
He called five dealerships before finding one that would agree to put that large of a purchase on a credit card. “I think they were willing because it was a 2018 car, and I wasn’t getting any discounts,” Mixter said. The dealership didn’t charge Mixter any additional fee for using a credit card, he said. (MarketWatch verified with the dealership that it typically doesn’t allow entire car purchases on credit cards, but this situation was an exception.)
Before making the purchase, Mixter had to call Chase
the bank that issues the United MileagePlus card, to increase his limit to accommodate the large purchase.
Like Mixter, many consumers are successful when they call their bank to increase their limit: Some 89% of credit cardholders who asked for a higher limit ended up receiving one, according to a survey from the credit card website CreditCards.com.
Increasing the limit can actually help one’s credit score, since part of credit scoring is the total amount of credit available, compared to how much credit is used, known as “credit utilization ratio.” But of course, that only works if you pay off the purchase, as not to use the entire credit limit for long periods of time.
When Mixter was ready to pay his credit card bill, it got more complicated.
He didn’t have enough cash on hand to pay the car off in full, and he didn’t want to start racking up interest on the credit card, which charges 16.99% to 23.99% in APR, depending on the cardholder’s creditworthiness.
“This was the debacle point of it,” he said.
He assumed he would be able to get a 0% interest car loan, from outside the dealership, and use that to pay off the bill.
However, he was unable to do that, because banks were unwilling to lend to him for the new car, and told him to pursue a loan through the dealership. But because he was paying for the car on a credit card, he couldn’t use a dealership loan.
After panicking a bit, Mixter decided to open three 0% APR balance-transfer credit cards, and he shifted the balance from his United card to those cards. He’ll pay those off before he starts collecting interest on them, he said. He has 14 months when he can pay 0% interest on them.
What he’ll do with the points
Mixter plans to use his points to help finance a trip to Italy with his wife, for his 40th birthday and their 10th wedding anniversary. Knowing what he knows now, he’d still put the car purchase on a credit card, Mixter said.
“The only thing I might have done differently was to get a card that got you triple the points.”
What he could have done differently
Schulz of CreditCards.com pointed out that trying to put a car on a credit card could mean the dealership will just raise the price of the car, because the dealership has to pay card networks for processing a credit-card transaction.
“Everything is a negotiating point when you’re trying to buy a car,” he said.
Also, as Mixter learned the hard way, it’s important to do extensive research before putting a large purchase on a card you can’t afford to pay off in the first month.
Some cards put a cap on the amount of points you can earn, so be sure your card would allow you to get the maximum amount of points; if not, it may not be worth it, Schulz said.
Mixter did not want to open a new credit card to purchase the car. But if he had, he would have been able to profit from the purchase more, Schulz said.
Several cards offer two or more points per dollar spent, such as Citi’s Double Cash card, which offers 1% on purchases and another 1% when consumers pay their bill. Just check to make sure they don’t have an annual cap on those rewards before making the purchase, Schulz said. (Citi Double Cash does not have a maximum.)
Some cards also offer lucrative sign-up bonuses, and a large purchase can help meet any initial spending requirements, Schulz said.
Some of the best purchases on which to earn points are large household purchases such as furniture and appliances, if you can pay them off in full, Schulz said, since those are items on which merchants typically won’t negotiate.