How to pay your car insurance premium with a credit card?
Credit cards have undoubtedly updated the payment side of today’s world. Aside from superior security, you also gain the dependability of fraud prevention measures, as well as other benefits for using a credit card for daily payments. These cards can be used to pay for a variety of purchases, including shopping and reserving hotels and flights. However, when it comes to buying a car insurance premium with a credit card, many people are apprehensive and puzzled about if it is even possible.
Why Should You Use Your Credit Card for Car Insurance Premium Payments?
Besides strengthening the payment infrastructure with numerous features for security and reliability, credit cards also make shopping fascinating with their range of benefits like loyalty rewards, cashback, and numerous shopping offers from time to time. Similarly, you can enjoy various benefits of paying your car insurance premium through your credit card.
Here are a few reasons to choose a credit card for car insurance premium payments:
- Ease of Payment – Credit cards provide a convenient mode of payment compared to net banking and debit cards. Moreover, paying your bills through credit cards keeps all your payment details in one place, which makes it easy to track and retrieve your payment details.
- Earning Reward Points – One of the biggest advantages of paying bills and car insurance premium is reward points. With every payment, you receive loyalty benefits in the form of rewards as long as you make timely payments of the outstanding amounts. You can redeem these reward points for shopping, entertainment, lifestyle, and travel expenses, and avail of attractive discounts on your future purchases.
- Enjoy Extra Time to Pay Your Premiums – When you pay your car insurance premiums with credit cards, it is transformed into an outstanding bill on your card. With this feature, you get additional time equal to your grace period to pay your insurance premium. If you pay your premiums in full within the due date, you won’t need to pay any interest on your purchase. Consequently, you get a short-term loan for free to pay premium of your car insurance in UAE (and that too with a longer repayment period).
- Pay in Easy Monthly Payments – While the advantage of a longer repayment duration is there, you can also convert your car insurance premium cost into easy monthly instalments when paying through a credit card. Thus, you can choose to repay your premiums in smaller chunks every month without compromising your budget and lifestyle with credit cards.
How to Pay Your Car Insurance Premium through Credit Cards?
Most insurance companies in the UAE allow car insurance premiums payment through various modes. At the time of payment, you will be required to select the payment method at your convenience. Some common ways of premium payments are as follows.
- Internet Banking payment
- Cheque and cash payments
- Credit card payment
- Debit card payment
However, one should note whether are paying an additional fee for the transaction before making a payment through their credit card. Several insurance companies in the UAE levy a fee on your monthly payments through a card. In some cases, the fee is waived if you use your credit card for making annual premium payments.
In addition, paying your car insurance annual premium through a credit card can also offer your numerous rebates and offers. Hence, a credit card can be a smarter choice when paying your car insurance premium in full. However, the conditions associated with them must be analyzed first before proceeding with the purchase.
While a credit card gives you convenience in paying your car insurance premium, it is crucial to pay your credit card monthly bills in order to avoid any interest charges. Credit card interest rates are the highest among all types of loans, ranging anywhere between 25% to 40% APR.
Consequently, using your credit card for car insurance payments is viable only if you are able to repay your car bills conveniently every month. In case you fail to pay the bills before the due date, you may get into massive debt. Thus, it is always advisable to use your credit card for car insurance payments only if you can manage your debts and credit card bills efficiently.
Downsides of Paying Your Car Insurance Premium through Credit Card
Despite several advantages, there are certain downsides to paying your car insurance premiums through credit cards. The following are the possible disadvantages you may face during premium payments.
- Additional Fee – Whether you opt for a debit or a credit card, the payment channels can charge you a transactional fee. In addition, your insurance provider may also include a service charge on online payments. While it may seem like a few AEDs, paying additional charges every month can add up to a considerable amount. These additional charges must be kept in mind while deciding if your credit card is a convenient option for car insurance premium payments.
- Paying Interest Rate – In case you pay your premiums through a credit card and fail to pay back the amount on time, the credit card issuers levy heavy interest rates including penalties. As these charges are significantly high, you may end up paying a lot more than you initially owed. Moreover, if you convert your car insurance premium into an easy instalment plan, you still need to pay interest on your repayments. It is advised to choose to pay the car insurance premium through credit cards only if these interest rates are not considerably bigger.
- Affects Your Credit Score – Credit score, defining your creditworthiness, depends on several factors including your spending habits and credit utilisation ratio. Your credit card has a maximum spending limit.
How Much Car Insurance Premium Can You Pay Using a Credit Card?
While it is obvious that you can pay a car insurance premium up to your credit limit, it is not a wise choice to max out on your credit utilisation as it impacts your credit score. Several insurers go through your credit history and score to understand your financial management while offering you insurance.
As a general rule, you can try to ensure that you don’t exceed 30% of your total credit limit when paying your car insurance premiums through a credit card. Increasing your credit utilisation ratio may also increase your car insurance premiums.