Home > Credit Cards > 4 Credit Cards That Can Help You Save for a Car

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[DISCLOSURE: Cards from our partners are mentioned below.]

 

The more you save up for a down payment on your next car, the better off you’ll be financially when you drive off the lot. A bigger down payment can reduce the amount you need to borrow,  increase the range of cars you can afford and even lower your monthly payments. But saving up for a car can be difficult when you’ve got many other expenses.

Cash back credit cards can help you save by earning money back on your purchases, putting cash back in your pocket.

These four credit cards can earn you cash back and that you can use to help you pay for your next ride.

1. Discover it Card

Rewards: 5% cash back on up to $1,500 in purchases per quarter for rotating bonus categories, 1% cash back on everything else
Signup Bonus: Discover will match the cash back you earn in the first year.
Annual Fee: $0
Annual Percentage Rate (APR): 0% for six months on purchases and 18 months on balance transfers, then variable 11.99% to 23.99%
Why We Picked It: Long-term planners can use Discover’s cash back match for down payment assistance.
For Your New Car: This card earns 5% cash back on bonus categories, such as restaurants and home improvement stores, that rotate every quarter. All other purchases earn 1% cash back. Plus, Discover will match all the cash back you earn in the first year. If you have a year or more to save up for your new ride, that bonus can help you make a final push to boost your down payment.
Drawbacks: To get the most out of this card, you’ll have to do the work of tracking and activating spending categories each quarter.

2. Chase Freedom

Rewards: 5% cash back on up to $1,500 in purchases per quarter for rotating bonus categories, 1% cash back on everything else
Signup Bonus: $150 bonus cash back when you spend $500 in the first three months
Annual Fee: $0
APR: 0% for 15 months, then variable 15.74% to 24.49%
Why We Picked It: The 5% cash back bonus categories and signup bonus can help you quickly save.
For Your New Car: With 5% cash back on quarterly rotating bonus categories like gas stations and grocery stores, you’ll have plenty of ways to save. There’s also a $150 bonus when you spend $500 in three months, which shouldn’t be too difficult.
Drawbacks: Like Discover it, this card requires a bit more maintenance.

3. Blue Cash Preferred by American Express

Rewards: 6% cash back on up to $6,000 in yearly spending at supermarkets, 3% cash back at gas stations and select department stores and 1% cash back on everything else
Signup Bonus: $150 bonus cash back when you spend $1,000 in the first three months
Annual Fee: $0 intro annual fee for the first year of Card Membership, then $95.
APR: Variable 13.99% to 24.99%
Why We Picked It: Multiple ways to earn special cash back rates means you’ll have many ways to save for your car.
For Your New Car: With 6% cash back at supermarkets, 3% cash back at gas stations and certain department stores and 1% cash back elsewhere, there’s no shortage of opportunities for saving. Plus, $150 bonus cash can go right toward that down payment.
Drawbacks: There’s a $95 annual fee, which slightly reduces the potential profitability of your card.

4. Citi Double Cash

Rewards: 1% cash back on all purchases and an additional 1% upon payment
Signup Bonus: None
Annual Fee: $0
APR: 0% for 18 months, then variable 14.49% to 24.49%
Why We Picked It: If you religiously pay off your balance each month, you’ll consistently earn 2% cash back on all purchases. (Full Disclosure: Citibank advertises on Credit.com, but that results in no preferential editorial treatment.)
For Your New Car: With all purchases earning 2% cash back by the time you pay, you can earn a solid cash back rate no matter what you’re buying.
Drawbacks: You’ll have to wait until you pay to earn the full cash back rate.

Choosing a Credit Card to Help Save for a Car

Cash back is the primary way credit cards can help you save for a car. When picking a credit card to help you afford your next ride, you’ll want to choose a card that rewards the way you spend. You can try to find a card that offers special cash back rates on the purchase types you make most frequently. Or, if you tend to spread your purchases around at many types of merchants, a card with quarterly rotating purchase categories or a flat cash back rate on all purchases might be a good fit.

Be sure to check the cash back redemption options on any card you’re evaluating. Some cards will let you redeem your cash back as a deposit to your bank account, while others may only provide a credit to your credit card statement. The latter method can still help you save for a down payment as you’ll have a smaller credit card bill, but it’s something you should keep in mind.

It’s also important to remember that a cash back card works best when you pay off your balance in full each month, especially once any 0% APR period expires. That’s because interest charges will eat into the cash back you’ve earned.

What Credit Is Required for a Card That Helps You Afford a Car?

Cards with strong cash back offers and signup bonuses usually require good to excellent credit. Before you apply, you’ll want to be reasonably sure you can get approved, as a hard credit inquiry resulting from a credit card application can slightly hurt your credit score. You can check two of your credit scores completely free at Credit.com.

At publishing time, the Discover it, Chase Freedom, Blue Cash Preferred by American Express, and Citi Double Cash credit cards are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment. This content is not provided by the card issuer(s). Any opinions expressed are those of Credit.com alone, and have not been reviewed, approved or otherwise endorsed by the issuer(s).

Note: It’s important to remember that prices for products and services frequently change. As a result, rates, fees and terms cited in this article may have changed since the date of publication. Please be sure to verify current rates, fees and terms with the company directly.

Image: BraunS

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