Can You Buy a Car With a Debit Card?

Can I Buy a Car With a Debit Card?

A debit card is a payment card linked to your bank account. When you use a debit card to make a purchase, the money is immediately taken from your account to complete the transaction. You can buy a car with a debit card if the dealership allows it—as long as you have enough money in your bank account and the purchase amount is within your bank's daily debit card spending limits.

Banks typically cap debit card purchases at $2,000 to $7,000 per day to protect cardholders whose debit cards are lost or stolen. Your limits may be higher or lower depending on your bank policies and account type. If your limit isn't high enough to buy a car, you can contact your bank to see if they'll temporarily increase your debit card purchase limit.

Even if you have sufficient funds in your account, banks sometimes decline transactions for large or unusual purchases to protect you against debit card fraud. Calling the bank a few days before the purchase with the approximate amount, dealership name and address can help ensure the transaction is approved.

In addition to bank limitations, dealerships may also cap the amount they'll accept via debit card. For example, some dealers may accept a down payment or deposit via debit card but request a cashier's check for the balance of the purchase. Before visiting the dealership, contact the financing department to confirm they accept debit card payments and any limits on amounts.

Tip: To ensure you have enough in your bank account to pay for a car, remember to include dealership fees, sales taxes, vehicle registration fees and other charges in addition to the sales price. Check your available balance before heading to the dealership.

Learn more: Credit Card vs. Debit Card: How Are They Different?

Pros and Cons of Buying a Car With a Debit Card

If you're considering buying a car with a debit card, it's important to be aware of the benefits and downsides.

Tip: Consider using your debit card to make a larger down payment rather than paying for the car in full. A big down payment means a smaller loan, which can reduce your interest rate and monthly payment.

Learn more: Ways to Pay Less Interest on a Car Loan

Should I Buy a Car With a Debit Card?

Buying a car with a debit card could make sense if:

• You're purchasing a lower-priced used car that's within your debit card's spending limits.
• The dealership accepts debit card purchases.
• You don't need the potential credit-building benefits of an auto loan.
• You don't want to take on new debt.
• You can afford to pay cash for the vehicle without compromising your other financial goals.

On the other hand, a debit card may not be the best payment method if:

• The dealership doesn't accept debit card payments.
• The vehicle price exceeds your debit card spending cap.
• You can qualify for a 0% APR auto loan.
• You want the potential boost to your credit score from making timely auto loan payments.

Learn more: Should I Pay Cash for a Car?

Other Ways to Buy a Car

There are plenty of other payment options when buying a car.

• Direct financing: You can get auto loans directly from banks, credit unions or online lenders. Before visiting the dealership, it's smart to shop around for direct auto loans and get preapproved, which can give you more bargaining power at the dealership.
• Dealer-arranged financing: Many dealerships arrange financing by submitting your loan application to several lenders. Some also offer financing through the manufacturer's financing company.
• Personal check: Most dealerships take personal checks for either your down payment or the full purchase price of the car. However, temporary checks, or checks from someone other than the car buyer, may be rejected.
• Cashier's check: You can pay cash for your car by purchasing a cashier's check from your bank in the amount you want and taking it to the dealership. Cashier's checks are guaranteed by the issuing bank, giving the dealership confidence that the check will clear.
• Wire transfer: Electronically transferring money from your bank account to the dealership via wire transfer is a safe way to pay with cash; however, it typically involves fees.
• Credit card: If your credit limit is high enough, some dealerships let you use a credit card to make a down payment or even pay for the car in full, but since dealers pay processing fees on credit card transactions, they may limit the amount you can charge. Buying a car with a credit card generally only makes sense if you have a rewards card and pay the balance off right away. Otherwise, a large balance on your card could spike your credit utilization ratio, which may negatively impact your credit score.

Learn more: What Are the Different Types of Car Loans?

The Bottom Line

You can buy a car with a debit card if the dealer allows it and the purchase is within your spending limits. If you can qualify for low interest rates, financing the car may be a better option than paying cash. However, if auto loan rates are high or you prefer to avoid debt, paying cash for the car may make more sense for you.

Having good credit could help you secure a lower interest rate on your auto loan. You can check your FICO^® Score^Θ for free from Experian and see what you can do to improve it. Shopping around for auto loans and using Experian's car payment calculator to compare offers will help you narrow down the best payment method for you.