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This man made a $45,000 2018 Honda Odyssey minivan purchase and put it on his credit card to earn miles but he sure doesn’t seem to have come out ahead in the transaction. There are lessons we can learn for maximizing miles at the lowest cost.
When Chris Mixter, a 39-year-old IT consultant living in Virginia, was ready to buy a car, he decided to try to get a free vacation out of it, too.
His idea: Put the car on a rewards credit card, just to get the rewards points.
He made three mistakes.
- He paid with a United co-brand credit card. He also has a Starwood Preferred Guest Credit Card from American Express but says that Amex wouldn’t extend him enough credit to buy the car. Starwood points are worth a lot more than United miles. Why not make a split tender payment?
And if he was going to use a Chase card a Chase Sapphire Preferred Card‘s points are worth more than United miles (and transfer to United miles and other programs too so you can decide later based on who has award availability or what account needs a top off) and if you have a Sapphire Preferred or Ink Business Preferred Card then spending on Freedom Unlimited could be the better play.
The United Explorer Card does earn 10,000 bonus points after $25,000 spend in a year — but that’s another argument for at least making a split tender payment (to not go over $25k) rather than putting the whole purchase on that card.
- Overpaying for the car so he could pay with a card. He believes the dealership was willing to take a credit card for the full payment because he wasn’t getting any discounts on the car. He was essentially paying for the credit card merchant fees in the purchase price.
Having grown up in a family of car dealers I can tell you if you aren’t getting a discount on the car, don’t buy the car. If no one will give you a discount on the car, choose a different car. You’re overpaying. At a minimum consider waiting out other fools who are overpaying.
Of course I also believe that cars are generally the same, most nowaways come with sit down seats, push down breaks, see through windows and spin-around wheels regardless of price point. Your mileage may vary. But that’s the simple reason I didn’t buy a Tesla.
- Paying with a credit card when you need financing. He figured he could just take out a 0% loan on the car from his bank, but he couldn’t.
You should only charge to your credit card what you can pay off right away. Never pay credit card interest. He took out a 0% balance transfer card, given his choices above and that he was transferring from a Chase product I’m guessing it wasn’t Chase Slate. So let’s assume he paid a 3% balance transfer fee. He overpaid for the miles and now has 14 months before he starts paying card interest. He’d likely have been better off financing through the dealership.
He didn’t even use the purchase to help earn a large signup bonus. And he didn’t earn any category bonuses. He got himself in trouble with the financing. And he likely overpaid both for the car and to finance the purchase.
- Choose your card wisely to earn the most points
- Only pay with a card if you already have financing in place or can pay the card off at the end of the month
- Negotiate the price of the car first before talking about paying with a credit card. Rinse repeat from dealership to dealership. If you lead with credit card payment, the dealership’s charge for processing will be baked into the price of the car.