There are many reasons you might want to pay a loan with a credit card. Maybe you want to earn rewards on your mortgage payment. Or maybe you want a reprieve from interest on your auto loan by paying off the balance with a card’s 0% APR offer.
Unfortunately, most loan types prohibit you from making a payment directly with a credit card. Yes, there are some workarounds, but higher interest rates, processing fees and potential risk factors generally make those methods inadvisable.
Here are some potential ways to pay a loan with a credit card.
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Transfer your loan to a credit card
You may be able to transfer your existing loan balance to a credit card. However, this would make sense only if the interest rate on the credit card is lower than the rate on your existing loan.
While interest rates will vary based on your credit scores, most credit cards will carry a higher APR than other types of loans. As of May 2023, the average APR across all consumer credit cards that charged interest was 22.16%, according to the Federal Reserve. By comparison, the average rate on auto loans for the same period was 6.63% for new cars and 11.38% for used cars (according to Experian), and the average APR for new federal student loans was 5.50%.
One exception could be a balance transfer to a credit card that offers an introductory 0% APR period — but there are risks. The longest 0% intro APR periods generally cap out at 18 to 21 months, and you’ll need to be approved for a credit limit on the card greater than your existing loan amount to transfer the full balance. You’ll usually incur a fee to transfer the loan, typically between 3% and 5% of the total balance. And if you don’t pay off the transferred balance before the 0% APR period expires, you’ll then start to incur interest on the remaining balance at the normal, ongoing (and much higher) APR.
Use a third-party service
Some third-party payment processors, such as Plastiq, allow you to use a credit card to pay vendors that don’t otherwise accept cards. This might be an option if you’re temporarily strapped for cash or you’re trying to snag a sign-up bonus. But be aware that you’re going to incur a healthy processing fee for using the service, and if you don’t end up paying off your card balance on time, you’ll owe interest on it at whatever rate your credit card normally charges.
Tap your card’s cash advance limit
A credit card cash advance is a short-term loan against the credit line on your card. A cash advance can let you quickly access cash to pay down your loan, but it’s among the most expensive ways to pay a loan with a credit card. You’ll incur a cash advance fee from your card issuer, which could be either a flat rate or a percentage of the total advance amount. There’s also no grace period, so you’ll start accruing interest the second you receive the advance. And that interest rate on cash advances is usually higher than for regular purchases.
Because these costs will likely be higher than the interest payment on your existing loan, a cash advance is inadvisable.
Use your card’s ‘flexible financing’
“Flexible financing” programs like My Chase Loan and Citi Flex Loan allow you to get a loan against your card’s existing credit line. You’ll pay a fixed interest rate and pay the loan back over time, typically from six to 24 months. Similar to a cash advance, this could give you an immediate cash infusion directly to your bank account, which you’d use to pay off your existing loan. But if the APR your card gives you for that loan is higher than the existing loan you’re trying to pay off, it won’t make sense.
Should you pay a loan with a credit card?
While it’s possible to pay a loan with a credit card, it will almost always cost you to do so. That cost usually comes in the form of transaction fees and higher interest rates.
Transferring an existing loan to a credit card offering a 0% intro APR on balance transfers could make sense for some people, but typically only if you know you’ll be able to pay off the balance in full by the time that promotional window ends.