Credit Card Auto Insurance: What's The Real Deal?

Whether or not your credit card includes auto insurance depends on the type of card you have. Many credit cards offer secondary rental car coverage, which means that the coverage kicks in after your personal car insurance policy. However, some credit cards offer primary rental car coverage, which means that you can submit an accident claim immediately without going through your personal insurance policy first. It's important to carefully review the benefits and coverage offered by your specific credit card to understand what is and isn't included.

Pros and cons of paying for auto insurance with a credit card

Pros of paying for auto insurance with a credit card:

• You can earn reward points, which can be redeemed for travel, cash, and other expenses.
• It is easy and convenient to pay for your insurance with a credit card. You can set up automatic monthly payments, so you don't have to worry about your premium each month.
• Paying with a credit card gives you more time to pay your bill.
• You can save time as credit card payments are made instantly, saving time on mailing your payment via mail or money order.
• You can pay your bill in full. Most car insurance companies offer a discount for paying your bill upfront.

Cons of paying for auto insurance with a credit card:

• You may have to pay additional fees or charges.
• Interest rates: If you don't pay off your credit card in time, you'll pay interest on the amount you owe. Interest can get pricey, which is why it's always best to shop for a low-interest credit card.
• Increased debt: Credit card debt can add up quickly. If you put your car insurance premium on your credit card and can't pay it off, you'll increase your debt.
• Negative credit score: Continually maxing out your credit card or purchasing near its limit can have a negative impact on your credit score.

Credit card car rental insurance

When renting a car, you have the option to add extra coverage offered by the car rental agency. However, before purchasing insurance at the counter, check if you're covered by either your personal auto insurance policy or your credit card. Most travel rewards cards come equipped with special car rental insurance, allowing you to skip the rental company's insurance.

If you want to be covered by your credit card's car rental insurance, you must pay for the full rental cost (plus fees) with that card. Car rentals booked with points are generally included. Typically, the cardholder must also be the primary renter, though other drivers are often covered if they are on the rental contract. Finally, your credit card's terms usually require that you decline the car rental agency's Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW).

CDW covers damage to the rental vehicle in case of an accident. LDW offers the same protection, as well as coverage if the car is stolen. These terms are sometimes used interchangeably, so be sure to pay attention to the fine print to know what kind of coverage you're getting.

Note that not all types of cars are covered. Luxury cars and recreational vehicles, for instance, are often not included. There's also usually a limit on the number of days that you can take out coverage, often up to two weeks (14 days) or a month (31 days).

Primary vs. secondary coverage

Most credit cards offer secondary coverage, which means the coverage kicks in after your personal car insurance policy. In the case of an accident, theft or damage, you'd first need to file a claim with your own car insurance company before submitting a claim through your credit card's insurance provider. If you don't have a personal auto insurance policy, secondary coverage may still kick in — just check your policy to make sure you're covered.

Primary coverage, on the other hand, means that you can submit an accident claim right away by calling the number on the back of your card, without first submitting it to a personal policy.

Liability coverage isn't included in most credit card and/or rental car CDWs, which only cover damage to and/or theft of the rental car (but not bodily damage or other personal property damage). If you're involved in an accident resulting in injury to another person, you probably won't be covered.

Full liability protection comes with the rental company's insurance. You typically have to add it on at the counter and/or at the time of reserving the car, unless you have extended rental car coverage through your personal auto insurance policy. Liability protection is likely more expensive for rental cars than for your own car; it runs about $8 to $25 per day. Some countries may actually require that you opt into liability coverage when renting a car.

Not all credit cards offer car rental coverage. For example, Discover doesn't provide car rental insurance, and Citi has dropped this benefit on most of its cards. Some Capital One cards offer this perk as a benefit from the card network. American Express includes secondary car rental coverage on many of its cards, with the option to buy a Premium Car Rental Protection policy that provides primary coverage. Most Chase cards come with this benefit as well.

Best credit cards for car rental insurance

The Chase Sapphire Reserve® and its lower annual fee cousin, the Chase Sapphire Preferred® Card, are top picks for the best cards for car rentals. Both cards provide primary car rental coverage for car rentals in most countries. These cards offer coverage for rentals of up to 31 consecutive days at a time. The Sapphire policy covers losses, including physical damage and/or theft of the rental vehicle, valid loss-of-use charges assessed by the rental company, and reasonable and customary towing charges related to a covered loss.

The PenFed Platinum Rewards Visa Signature® Card comes with Visa Signature perks, including a secondary auto collision damage waiver (CDW) that reimburses cardholders for the covered theft or damage, as well as valid administrative and loss-of-use charges imposed by the auto rental company, and reasonable towing charges that occur while you are responsible for the rental vehicle. Coverage lasts up to 15 consecutive days within your country of residence or 31 consecutive days outside the U.S.

The Blue Cash Preferred® Card from American Express provides auto collision damage waiver (CDW) covering theft and/or damage up to the cost of the vehicle for up to 30 consecutive days.

The American Express® Gold Card provides an auto collision damage waiver (CDW) covering theft and/or damage up to the cost of the vehicle for up to 30 consecutive days.

Companies that accept credit card payments and have low rates

When it comes to auto insurance, most major companies accept credit card payments and offer low insurance rates. Here are some companies that accept credit card payments and are known for their competitive pricing:

• State Farm: They offer convenient payment options, allowing one-time online payments, account creation, or direct contact with an agent to pay using a credit card.
• GEICO: GEICO provides flexibility with a variety of credit card payment options, including automatic payments, customised payment instalments, and paperless payment methods.
• Progressive: Progressive customers can conveniently make credit card payments online or through their mobile app. They offer both one-time and automatic payments.
• Erie Insurance: Erie is known for its competitive rates, especially for teen drivers, female senior drivers, and male senior drivers. They also have low rates for drivers with poor credit.
• USAA: USAA offers exclusive policies for current and former military members and their families, with rates that are often lower than the national average.
• Nationwide: Nationwide is another company with low insurance rates, particularly for drivers with poor credit. They also have competitive rates across various driver categories.

While these companies are known for their low rates, it's always a good idea to shop around and compare quotes to find the best deal for your specific circumstances. Additionally, when considering paying with a credit card, be mindful of potential fees and interest charges associated with credit card usage.

How to pay for car insurance with a credit card

Most car insurance companies allow you to pay your premium bills with a credit card. You can pay online, over the phone, or through the company's mobile app. Here are the steps to pay your car insurance with a credit card:

• Log in to your online account or app: Go to the billing section and find the bill you want to pay via credit card.
• Fill in the payment information: This includes your name, card number, CVV, expiration date, and billing address or ZIP code.
• Receive a payment confirmation: You should receive a copy of your payment confirmation via email or download.
• Set up autopay (optional): You can also set up automatic payments with your credit card to ensure you never miss a payment.

Advantages of paying car insurance with a credit card:

• Instant payment: Credit card payments are processed instantly, giving you more time to make your insurance payments each month.
• Convenience and ease: Paying with a credit card is fast and easy, and it helps keep all your payments in one place and easy to track.
• Reward points: As long as you pay your credit card balance on time, you can earn reward points, which can be redeemed for travel, cash, or other expenses.
• Discounts: Some insurance companies offer discounts if you pay your policy's premium upfront and in full or use autopay.

Disadvantages of paying car insurance with a credit card:

• Fees: Some insurance providers charge fees for paying with a credit card, typically ranging from $2 to $15 per month.
• Interest charges: If you don't pay your credit card bill in full each month, interest will be added to the bill, which can be high.
• Credit score impact: A higher card balance can hurt your credit score, especially if you have a low credit limit.
• Debt risk: It's easy to fall into debt if you don't use your credit card with discipline and make payments on time.

Discounts and fees when using a credit card to pay for auto insurance

Using a credit card to pay for auto insurance can have its benefits, but it can also come with some drawbacks. Here are some of the discounts and fees you may encounter when using a credit card to pay for auto insurance:

Discounts

• Reward points or cash back: Paying your auto insurance with a credit card can help you earn reward points or cash back, depending on your card. These rewards can be redeemed for travel, cash, or other expenses.
• Convenience: Using a credit card to pay for auto insurance can be more convenient, as it allows you to set up automatic monthly payments and keep all your payments in one place.
• More time to pay: Credit cards give you more time to pay your bill, as you only need to pay your credit card bill by its due date, which is usually at the end of the month.
• Paid-in-full discount: Some insurance companies offer a discount if you pay your policy upfront and in full every six months or year. Using a credit card can make it easier to pay the full amount upfront.
• Autopay discount: Even if you prefer monthly payments, setting up autopay may qualify you for a discount, and it helps ensure you don't miss a payment.

Fees

• Installment fees: Some insurance companies charge installment fees for paying your bill in monthly increments. These fees can range from $2 to $15 per month, depending on the company and your location.
• Interest rates: If you don't pay off your credit card balance in full each month, you'll be charged interest on the remaining amount. Credit card interest rates can be high, so this can quickly increase your overall debt.
• Credit score impact: Using your credit card to pay for auto insurance can negatively affect your credit score if you regularly max out your card or spend close to your credit limit. This is because of a factor called the credit utilization ratio, which is the percentage of your total credit limit that you're using.
• Additional fees: Some insurance companies may charge a small fee for using a credit card to pay your premium. These fees can add up over time, so be sure to check with your insurance provider before choosing this payment method.

Frequently asked questions