Buying a car is a significant financial decision, especially in places like Singapore where owning a car can be quite expensive. However, if you’re set on making that purchase, you might as well maximize the benefits you can get from it. One way to do this is by choosing the right credit card to use for the transaction.
Why Use a Credit Card to Buy a Car?
For many, the idea of using a credit card to buy a car might seem counterintuitive. However, there are a few compelling reasons to consider it:
- Miles and Rewards: Some credit cards offer substantial miles or rewards for big-ticket purchases. While there aren’t many cards that provide special bonuses explicitly for car purchases, there have been instances in the past. For example, Mazda was once a Platinum 10Xcelerator merchant, allowing AMEX Platinum Charge cardholders to earn 7.8 miles per dollar (mpd) on up to S$5,000 of booking fees. Additionally, until 20 September 2023, UOB had a partnership with Lexus, offering its premium cardholders a flat 104,000 miles for a S$23,000 deposit.
- Flexibility: Most car dealers accept credit cards for the initial deposit or booking fee. While you can’t swipe the full cost of the car due to the high fees dealers would incur, you can use a credit card for the initial deposit. This deposit varies, but in some cases, it can be as much as S$10,000. Moreover, many dealers allow splitting this transaction over multiple cards without additional fees.
Strategies for Maximizing Miles and Rewards
1. Category Spend Bonuses:
- Understanding the Basics: Category spend bonuses refer to the additional miles or rewards you earn when you spend in specific categories, such as dining, travel, or online shopping. While car purchases might not fall directly into these categories, some cards offer attractive rates for big-ticket items.
- Leveraging Multiple Cards: By using a combination of cards, you can maximize your rewards. For instance, on a S$10,000 deposit, you could use the UOB Visa Signature, UOB Preferred Platinum Visa, and Amaze + Citi Rewards Card to pay S$8,220 at 4 mpd. The remaining S$1,780 could be charged to the AMEX HighFlyer Card at 1.8 mpd. This strategy would yield approximately 36,000 miles. It’s essential to be aware of the spending categories and limits of each card to optimize this approach.
- Online Payment Links: Some dealers, like Tesla, provide online payment links for deposits. In such cases, cards like the DBS Woman’s World Card and Citi Rewards Mastercard/Visa can be particularly beneficial, offering attractive miles rates for online transactions.
2. Sign-up Bonuses:
- The Power of Sign-up Bonuses: These bonuses are additional rewards given to new cardholders when they meet specific spending criteria within a set period. They can be a goldmine of miles or points, especially for significant expenses like car deposits.
- Strategic Spending: If you have access to multiple cards with sign-up bonuses, consider splitting your car deposit among them. For instance, a combination of cards with available sign-up bonuses could earn you about 167,600 miles. However, be mindful of the annual fees and ensure that the potential rewards justify the costs.
- Fee-Free Strategy: If you’re not keen on paying annual fees, there are card combinations that can yield substantial rewards without any associated annual fees. By carefully selecting and using these cards, you can earn up to 122,080 miles on a S$10,000 deposit.
Purchasing a car is undeniably a major financial undertaking. However, with careful planning and strategic use of credit cards, you can significantly offset some of these costs through miles and rewards. By understanding the various bonuses available and leveraging multiple cards, you can maximize your returns on this significant expense. Additionally, it’s always worth negotiating with car dealers, not just on the price of the car but also on the amount you can charge to your credit card. In the world of credit card rewards, every mile counts, and with the right strategy, your new car purchase could take you miles further in your travel aspirations.