Photo: Joey Guidone

Using a credit card to help pay for a new or used car can be a great way to earn rewards, such as airline miles, cash back or points—so long as you pay off the card right away. If you end up carrying a balance, the risks could outweigh the rewards. Here are a few things to watch out for when deciding how to pay for your next car.

Do the math

The interest fees incurred on a balance could exceed the value of any rewards you earn. Don’t let a few hundred dollars in quick perks end up costing you thousands. Calculate and compare the long-term costs.

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Stay right-side up

By using a credit card for the down payment when financing, you are left with zero equity as soon as you drive off the lot, because the entire value of the car is tied up in debt. Even with gap coverage, an accident could leave you in the hole. That’s because if you made the down payment on your credit card and haven’t paid it off, you’ll still owe that money.

Protect your score

Carrying a balance—especially from the hefty cost of a car—can hurt your credit score, leading to higher interest rates that make it even more difficult to pay off your card.

Looking for a New Car?

Decided not to use a credit card? Discover how to finance a car through AAA Auto Loans.

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