Buy your car with a credit card, save 4-11% on costs

livemint.com:

₹12 lakh and getting cashback worth two flight tickets to Singapore. Well, you can make it happen. The only rider is that the purchase has to be made with a credit card.

In Ranchi, Gaurav Nishant swiped his plastic for the ₹7 lakh down payment of his car to cash in on the card’s potential rewards. Nishant earned air miles worth ₹50,000-58,000 (see graphic). “I have been using credit cards for nearly nine years now to earn rewards on my spends.

It was only natural that I would use a credit card for such a high value expense. It earned me 7-8% rewards," said Nishant. After reaping the benefits, the 31-year-old recently guided his brother to buy a car using credit cards and earned about 6% worth of rewards.

Most car dealers accept payments made with credit cards and even allow buyers to make the full payment with it. Sounds good. However, the process is a little more complicated.

From the car dealer charging an extra 1-2% for credit card payments to a possible impact on your Cibil score, there are several things to consider before swiping the plastic. Also, the rewards may not always be in the form of cashback or air mile points so the user should not confuse the potential benefits through this payment method to a discount on the purchase price. In most cases, car dealers charge an extra 2% fee for credit card payments.

For American Express cards, this fee could be higher, at 3-4%. By doing this, the dealers essentially pass on the MDR (merchant discount rate) to the customer. MDR is the fee merchants are charged by banks for accepting credit or debit card payments.