Creditcard APR vs. Car Loan APR (1 Viewer)

DavidAM · Apr 16, 2003

Is the way a creditcard charges interest on a balance the same method used when you get a loan on a car? The reason I ask is I'm shopping for a new car and yesterday AMEX sent me these checks in the mail with a 2.9% interest rate till it is payed off. The lowest rate I have been quoted on a 5 year car loan is 5.19%, so I was thinking I could use the AMEX check to buy a car and get a lower rate, but I'm not sure if the interest is compounded the same way. Anyone know?

James E · Apr 16, 2003

Danger, Danger Will Robinson

edit syntax error

SteveA · Apr 16, 2003

Most credit cards compound interest daily to maximize their income. I'm not sure about auto loans. The fine print should tell you.

Ryan Wright · Apr 16, 2003

Your biggest worry here is the temptation to pay the minimum. As you know, that will go down over a time. So if you start out paying $500 a month, the next month it will be $495, and then $400, and the next thing you know you've been paying for 5 years and the balance is only 1/4 of the way gone. Doh!

If you can honestly put the same check into it every month, no matter what the minimum payment says, then go for it. Note that your minimum payment will be about $100 for every $5k, so a $20k car will be $400 a month. That's a ~4.5-5 year loan.

ken thompson · Apr 16, 2003

Is this on an AMEX account you already have? If not you'll need to qualify for those rates. Sometimes those rates only apply to balance transfers not purchases. Also the rates should be calculated the same but check on annual fees. These will up your APY. Just some things to look into. Usually the rates will also only be good for six months. I know it said "until its paid off" but there may be some caviat in there that says you need to pay it off in six months. Just read everything carefully...twice.

Steve_Tk · Apr 16, 2003

I would definately read the fine print. This has "getting screwed" written all over it.

As with all credit cards, the info you don't want to read is very small.

Todd Hochard · Apr 16, 2003

As Ken said, just about every check I've gotten from AMEX like this has been for balance transfers only. And, that's means transfers from like accounts, according to their rules. No transfer from your house/car to your card.

Also, watch out for the transfer fee that's a % of the balance being transferred.

But, if all the fine print is correct, the lower interest rate is better. Even compounded daily on the card, vs. monthly on a car note, the card will still be

DavidAM · Apr 16, 2003

Thanks for all the replys. This is a card I have had for a couple of years now. I've read all the fine print and it all sounds correct. Before I would do this I would call and confirm everything, but I was curious if a creditcard APR was the same as a car loan APR. The AMEX mailer states 2.9% for balance transfers, cash advances, anything you want to use it for. It says to use the checks to buy whatever you want, take a vacation, etc. Interest is a daily periodic rate of 0.0079%. And it clearly states 2.9%APR until the balance is paid(no fine print saying its only good for 1 year, etc). I have no worries about paying a regular car note to the card, I would not pay the minimum balance only. That would defeat the purpose of doing this and getting the lower APR. My cards are always paid off....I do not use them as loans, just for convienance and put major purchases on my AMEX as they extend the factory warranty on whatever you buy, so I bought my HK520 reciever, digital camera, Dell Laptop all on there and pay it off when the bill comes in and they extend my warranty. So, do everyone agree that a creditcard APR is calculated the same way a car loan would be?

ken thompson · Apr 16, 2003

It should be the same. the only difference is whether they calculate you rate using 360 or 365 days but the difference is nominal. Keep in mind that if the car purchase puts you at your limit you wont be able to use the card. Not that that matters much. If all turns out legit there is no reason not to do it. Also I have found that the offers sometimes do not come with fine print on them directly. Somewhere on there they refer you to some other documentation tht you have to ask for. But like you said, call them.

Jeremiah · Apr 16, 2003

I think the low intrest rate of 2.9 will stay that low unless you are late or miss a payment and than it will jump up to the 10%-22% range. I get those same checks for my First card account and I wrote a friend a check for $4000 to pay off his bookie but I(or I should say he) is not paying that low rate, it has jumped to 22%.

I think it is probably pretty good, but you should call your credit card company and ask for more details.

DavidAM · Apr 16, 2003

The fine print did say if I miss a payment I will lose the 2.9% rate and it will go up to the standard 9.9%.

Michael D. Bunting · Apr 16, 2003

Be sure to check out the specific manufacturer of the vehicle(s) that you are interested in also...many times (like now on alot of makes) they have some pretty good deals...

I just got a 2003 Nissan Pathfinder LE

directly from Nissan Motor Acceptance Corporation (NMAC) with a .9 % APR !

The best my bank could do was 5.0 %

Check www.edmunds.com for current APR's from all the manufacturers here, you can sort by manufacturer:

Incentives & Rebates

Eric_L · Apr 16, 2003

Having a large unsecured revolving credit account on your report wont look to apealing. Don't take special dealer financing rates, take the rebate instead, and negotiate the price WITHOUT consideration for the rebate.

Why the rebate? becuase 50% or more cars loans are paid off early, not much good a low interest rate does than.

The difference in interest is about $25 the first month and then less each month thereafter. (factoring amortization)

For the price of a DVD and a happy meal I'd rather protect my credit.

Todd Hochard · Apr 17, 2003

I wrote a friend a check for $4000 to pay off his bookie but I(or I should say he) is not paying that low rate, it has jumped to 22%.

You are a much better friend than I'd ever be in that regard. I probably wouldn't do that for my brothers or sister.

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SteveA · Apr 17, 2003

Having a large unsecured revolving credit account on your report wont look to apealing.

That's definitely true. Revolving debt looks much worse to potential lenders than installment loans.

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Jeremiah · Apr 17, 2003

You are a much better friend than I'd ever be in that regard. I probably wouldn't do that for my brothers or sister.

Todd, I am not that nice of a friend, I was charging him about 50% interest on that 4 grand, so he owed me 6 grand. He didn't care in the least and is paying $500 a month. My buddy works for his dad's multi-million dollar trucking company, and once he was back to having access to his account there(once he started to be responsible) he would definantly have the cash to pay me back. I know this guy wouldn't screw me, he just isn't that type of guy, I just couldn't have him die on me.

Strangely, I would loan all my close friends money but not my brother.

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Todd Hochard · Apr 17, 2003

Strangely, I would loan all my close friends money but not my brother.

I'd loan a couple of my brothers and my sister money (and I have), but not one of my brothers. I've also loaned (and borrowed) money from friends in the Navy, but wouldn't do it for too many of my friends now.
For a lot of my family (cousins, aunts/uncles, etc), "loan" means "gift" to them, so I abstain. Nobody rides for free.

Todd

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