Updated on 05.24.13

Pay for Car Repairs with a Credit Card (45/365)

Trent Hamm

The usual personal finance advice tells people to avoid credit cards like the plague.

The reason for that is quite straightforward. Credit cards make it incredibly easy to get into debt trouble. When you use a credit card, you’re not directly spending your own money, and that abstraction is often enough to convince people to spend without thinking. After all, you don’t have to have the money in your checking account to cover it right now, do you?

I’m speaking from experience here. At one point in 2005, I had credit card debt that went well into the five figures while barely having enough to cover the bills in my checking account. One of the biggest reasons for this was the ease of using the credit card whenever I wanted something.

So why would I suggest actually using a credit card to pay for an expensive emergency like a car repair?

Pay for Car Repairs with a Credit Card (45/365)
Although I loved the original picture, I made a last minute decision to edit out the face of the card because I was concerned that there may be some personal data available there. Better safe than sorry with these kinds of things.

First of all, just because you use a credit card doesn’t mean you shouldn’t pay it off immediately. I use a credit card now for convenience, not because I don’t have the money in my checking or savings account to pay for the item. In fact, I’d go so far as to say that it’s not a good idea to use your credit card unless you do have the cash on hand to cover whatever you’re buying.

Credit cards are a tool of convenience, not something that enables an unsustainable lifestyle.

At the same time, however, credit cards do offer some additional protection against fraud and bogus repairs. For example, Mastercard offers several types of shopping protection that certainly cover a car repair bill, as does Visa.

I try to use my credit card for significant purchases like these so that if something goes wrong, I simply have another line of defense to protect myself against bogus practices.

One key step, though, is to know what protection your card specifically offers. The most effective way of doing this is reading through the terms of service on your card, though a more convenient way is to call the credit card company and ask them about the protections they offer for a car repair. Often, their basic protections will protect you against lemon repairs (though no protection is perfect and you might still find that something fails three years later and you have no recourse).

I have actually used this once, on a Visa card a few years ago. I had a repair done to the brake pads on my truck and the work was shoddy (I got the work done at an out-of-town shop because I was traveling). The first thing I did wasn’t to call the repair place, it was to call Visa. They told me exactly what to do, starting with contacting the repair place directly and calling them back if the repair place didn’t cooperate. They towed my vehicle, repaired the problem, and sent me on my way without an additional dime paid. (Of course, it’s not always possible, but another way to protect yourself against shoddy work is to choose your auto repair shop carefully.)

As always, pay off your bill in full each month. Using your credit card to pay for a repair doesn’t mean it’s a good idea to carry a balance on that card. Pay it off in full and don’t let a balance carry over unless you want to see your money start to vanish.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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  1. Genny says:

    This is good advice for any big ticket purchase. Years ago, I bought a new dinette set for cash. Once the company had our $$, they couldn’t find the order, they couldn’t find the item we wanted, they couldn’t specify a time for us to pick it up…yadda yadda yadda. It took days for a straightforward transaction. That is the last time I paid cash for a large item. Now I put it on the card and pay it off each month.

  2. Other Jonathan says:

    I bought plane tickets for my honeymoon with my CC. 4 months later, and 2 months before the wedding, the airline declared bankruptcy and shut down operations. I had to re-book with another company for about $400 more, but I got back the full cost of my original tickets from the credit card company, no questions asked. They may or may not have ever gotten any money back from the airline through bankruptcy procedures.

  3. Vanessa says:

    Credit card companies will always want you to attempt to settle the dispute with the merchant before they get involved. It is only fair to give the merchant a chance to make things right before you complain. I don’t see what calling VISA first accomplished.

  4. lurker carl says:

    Use a credit card that offers rewards like cash rebates or airline miles. May as well accumulate perks with the your expenditures.

    If Trent had used a certified mechanic to inspect his truck on a regular basis, like during routine oil changes, the out-of-town brake job would have been avoided. Automobiles shouldn’t be treated like kitchen appliances, preemptive actions can prevent breakdowns.

  5. kc says:

    A tiny bit of editing could have jumbled or removed the numbers on the credit card

  6. Gretchen says:

    Editing a photographer should know how to do.

    I’m surprised a place that gives shoddy brake jobs would tow for free. Although if you had a quality mechanic at home, you wouldn’t have had the need for the emergency brake job in the first place.

  7. jim says:

    “I’m surprised a place that gives shoddy brake jobs would tow for free”

    I think it was Visa that paid for the tow and additional repairs to make right the bad repair? I’m not clear on that but thats how I interpreted it. Either Visa paid or the initial shop had to then tow and repair again for free after the complaint. I’m not sure…

    “if you had a quality mechanic at home, you wouldn’t have had the need for the emergency brake job”

    Having a quality mechanic doesn’t make a car immune from failures.

  8. todo es bien says:

    #3, Vanessa. That is factually incorrect. I know, as American Express just handled something for me 2 weeks ago and the merchant was not involved. I got my refund direct from Amex in less than 24 hours and they did not contact the vendor.

    IF, you can handle credit cards, and that is a BIG if…
    I get SIX percent back on all my groceries, FIVE PERCENT back on all of my gasoline, THREE percent back on all my restaurants, TWO percent back on travel, and ONE percent back on anything else. And I don’t pay tax on any of that… So in essence I get an extra $2700 + – dollars or so TAX free every year. All of those cards are free except one, which costs $75. In addition I get all kinds of extended warranty, loss protection, vendor discounts, auto rental protection… If you know how to work it AND you have the discipline and good fortune to be able to not carry a balance it is a LOT of free money. They are not for everybody.

  9. todo es bien says:

    “I’m surprised a place that gives shoddy brake jobs would tow for free”

    If they gave good brake jobs they would not need to tow for free. Getting a free tow is the oldest trick in the book for sketchy auto shops to get customers, as they know once you are in their shop with a broken car the chances of you moving your car decrease massively, regards of what happens subsequently. Just because they offer free towing does not mean they are crooked, but whenever someone gives away something for free that has genuine market value you would do well to assume that you need to look more deeply into the motivation.

  10. josh says:

    @#8 todo es bien

    There is a PenFed card that gives 5% back on gas, which is only available for a very limited market. Is that the one you have? Also, I find it pretty hard to believe you have a card that gives 6% back on groceries without any sort of limitations. That type of card just doesn’t exist.

  11. valleycat1 says:

    todo es bien #8 – using the percentages you gave, we’d get rebates totalling maybe $500 a year. And FYI, it isn’t free money, it’s money you’re letting the CC hold for you (which they invest & make some off of for the time they hold it) and then give it back. I rarely buy something on sale because it’s marked down 5 or 6%. You aren’t MAKING any money by using these cards.

  12. AnnJo says:

    @8, todo esta bien, if you’re getting $2700 a year back, you must be spending $45,000 a year on groceries or even more if any of that spending is on gas and department stores. Wow!!

    I’d never spend anywhere near that kind of money on such items, but those rewards are enough better than the current cards I have that I may have to take the hit to my credit score and get it. I don’t spend much at gas or department stores, but an extra 5% off on groceries over my current rewards would be about $200 a year.

  13. krantcents says:

    Most people forget about the leverage of the credit card and how you can settle disputes.

  14. valleycat1 says:

    The figure AnnJo gives in #12 is a minimum spending amount. To get less than 6% of my own money returned to me eventually is not worth the hassle of keeping tabs on which CC I use for a specific type of purchase.

    I do agree with Trent & the other commenters that making major purchases on a CC but then paying it off as quickly as possible does offer you some protection.

  15. todo es bien says:

    #10 JOSH, I am going to let you in on my secrets. Hope too many people dont rush the gate and get this card cancelled. For the grocery card, you want the “American Express Blue Cash PREFERRED” (yes preferred… they have a free one similarly named, but this is the one that charges $75 a year. 6% back on groceries.
    I have a version of Discover that gives 5% on gas, up to $100 a month, and a Citi that gives 5% on gas, but only every other quarter.
    The above mentioned Amex also gives 3% back on gas, so that is worst case scenario.
    Both the Citi and the Amex give 1% back on any purchase. Actually, more than one of them give 2% on travel. As I mentioned in my first post, the AMEX card is $75 a year, but on that card alone I get back about $2000.
    And check this out!!! If you buy from a store with the AMEX card you get automatic 90 day return privileges, THEFT INSURANCE, and extended warranty. No, I am not kidding. Frankly, if you can qualify for this card (not hard) you would be crazy not to get it. So, yes, that kind of card does exist. And yes, you are welcome. Now, go forth and prosper! Peace.

  16. Tom says:

    “Having a quality mechanic doesn’t make a car immune from failures.”
    Agreed. I have a mechanic I like very much, but once your car gets old enough, things break down. We basically had to get rid of our 17 year old Taurus station wagon because our mechanic couldn’t get some obscure failed parts, but I trust he could have fixed it if he did.

  17. valleycat1 says:

    #15 – Amex’s fees to the retailers that accept their card are the highest (which is why many places don’t accept Amex) which raises the prices you pay at the store. And go back & re-read my comment #11. They are not giving you money.

  18. Debbie M says:

    I have used this protection once, for a Spanish class that turned out not to exist. It’s still a pain dealing with the problem, but totally worth it.

    I usually use credit cards for everything for the rewards, but, although I am not good at bargaining, I do ask, for large purchases, “is there a cash discount?” Generally there’s no discount, but occasionally, especially for car repairs, there’s a big cash discount. In that case, I pay with cash. But the point is well taken that using the card may be a better idea with unknown or out-of-town merchants.

  19. todo es bien says:

    #18 Valleycat – I dont care how much the charge the merchant. That is the merchants decision. They charge all credit card users the same amount. It does not raise the price I pay at the store, as I only use it where I favor the price, I am never required to buy from any store. And, as I mention, I can use my money for month interest free, whereas you pay at time of sale. AND I get rebates, buyer discounts, price protection, and theft protection. And hug rebate whenever I want it. If you think paying cash is better go for it. But, I have thousands of dollars in my pocket at end of year buying this way, and you have none. You do the math.

  20. ChrisD says:

    Yes the credit consumer act in the UK gives you more protection than you get for a cash purchase.
    Barclays used to do a series of advertisements about how they offered all this free insurance (i.e. cashback if there is a problem with the purchase). I thought this was a special deal they had organised on our behalf to sell their card. Turns out it is the law and applies to every form of credit, even non credit card based credit. (Pointing out the obvious is still a clever advertising tactic if it is not, in fact, obvious).

  21. Dana says:

    I always use my credit card for car repair bills. Thankfully I’ve never needed to use the fraud protection but it’s nice to know it’s there if I need it.

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