If you have a rewards credit card where you can earn cash back or points you can use for free travel, the thought of paying for your new vehicle with a credit card has probably crossed your mind. After all, a car costs tens of thousands of dollars, which means the rewards you earn with a credit card can be pretty significant. Can you buy a car with a credit card? Most probably. But the better question would be, should you? We explain and help you decide.

Is it possible to buy a car with a credit card?

Yes, it’s possible to buy a car with a credit card, but you’ll have to do a little legwork to find a dealer willing to accept a credit card payment. Not all car dealers would want to due to the high merchant fee they’d have to pay. Depending on whether you’re using a Mastercard, Visa or American Express, the merchant fees can cost the dealer anywhere between 1.55% and 3.5% of the sales price. On a $40,000 car, that’s as much as $1,400 for swiping or dipping your card.

When you’re shopping around for a car, ask ahead of time if you can pay for it with your credit card. That way, the dealer is aware and can factor the cost into their negotiation. Many states prohibit a business from adding a surcharge to your sale to offset their merchant fee, so watch out for that tactic. Dealers in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Minnesota, New York, Oklahoma, Texas and Puerto Rico can’t legally add a credit card payment surcharge to your total.

Does it make sense to buy a car with a credit card?

Is it worth the time and hassle to find a dealer willing to accept a credit card for your car purchase? Weigh the pros and cons. The upside to using your credit card for a car purchase is the fact that you’ll earn rewards fast. To maximize the rewards potential of your car purchase, look for special card promotions where your points or cash back rewards double for specific spending categories. Another benefit of paying with your card is that you won’t have to deal with financing or have your credit score checked. This may be important if you’re about to make another major purchase like a home. The caveat to this strategy is to pay your card balance off right away. Or your credit score can be affected by having a card with a high balance close to its credit limit.

The biggest downside of using your credit card to buy your car comes down to how much the purchase is going to cost you. Unless you have the cash on standby and ready to pay your card bill in full, you’ll be incurring higher fees if you choose to pay your balance in monthly installments than if you finance the vehicle through the dealer or bank.

Consider this — you use a rewards card with a variable rate between 17.49% and 24.49% to fund part or all of your purchase. If you’re planning to make monthly installments to pay your balance off, would you rather pay 24% interest to your credit card or 5% to an auto loan? It’s apparent the loan is the better financial choice.

Make sure you use the right credit card

Choosing the right card for your car purchase can make all the difference in how much extra such a purchase is going to cost you. Make sure your card’s credit limit is enough to cover the transaction without going over, or you may be charged an additional over the limit fee. If you plan on making monthly payments, consider applying for a rewards card with a 0% intro APR offer on new purchases. You won’t be charged interest on your monthly payments for a set period of time, usually 12 to 18 months, depending on the card. Make sure you can pay the full amount off before your no-interest promotional period ends, or the standard interest rate will kick in on the amount left.

Before you head to the dealer, review your credit card’s terms and conditions or call the customer service phone number on the back of the card to confirm you can earn the rewards you expect. Some cards limit the amount of rewards you can earn, defeating the purpose of making such a large purchase. Once you’re certain about which card in your wallet is the best one to make the vehicle purchase with, you can go out and test drive cars with confidence.

How to buy a car with a credit card

Once you’re ready to buy a car, consider calling ahead to the target car dealers you’re interested in to ask if they would accept a credit card payment. Doing so could save you a lot of time.

Some dealers may want to charge you a card surcharge or convenience fee for using your credit card. You can always try and negotiate a reduction or removal of the fee. As noted above, it’s illegal for businesses to charge customers a credit card surcharge in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Minnesota, New York, Oklahoma, Puerto Rico and Texas.

Once you complete the transaction, keep an eye out for your credit card statement. If you pay your card off in full by the due date, you won’t owe any interest. If you’re planning on using a credit card’s 0% intro APR period to make monthly payments, be sure your payments are on time, or you may forfeit the offer. Remember to pay the balance in full before your intro period is over or you’ll be charged the card’s regular interest rate on your outstanding balance.

Buying a car with a credit card isn’t a bad idea as long as you have a plan for how you’ll pay the card balance off. Watch out for high-interest rates and over-the-limit fees. To make the most out of your purchase, contact your card provider to confirm your car purchase will be eligible for earning the points or rewards you expect. Look for a card with a special offer of no interest on payments for a set amount of time — the longer, the better. Compare the best credit cards to find the one which may best fit your needs.