Can You Pay Automobile Sales Tax with A Credit Card?

How to Pay Automobile Sales Tax With A Credit Card

Paying your car's sales tax with a credit card can be a smart move for convenience or rewards. Here’s a general guide to navigating the process from start to finish.

1. Confirm Acceptance and Fees: Before anything else, check with your state or county's Department of Motor Vehicles (DMV). Verify that they accept credit cards for tax payments and inquire about any processing or convenience fees, which are common.
2. Choose the Right Card: A large tax payment can help you meet the spending threshold for a new card’s sign-up bonus or earn significant rewards. To find a card that fits your goals, you can use the Kudos explore cards tool.
3. Do the Math: Calculate whether the rewards you’ll earn will outweigh the convenience fee. If a 2.5% fee negates the 2% cash back you’d earn, using the card might not be the most cost-effective option unless you're chasing a valuable welcome bonus.
4. Make the Payment: Complete the transaction through the DMV’s approved channels, whether online, in person, or over the phone. Keep a record of the transaction confirmation for your files.
5. Pay the Bill Promptly: To fully benefit from any rewards earned, pay off the credit card balance in full before the due date. Letting the charge accrue interest will quickly erase the value of your rewards.

Impact On Your Credit Score

Using a credit card to pay your car's sales tax can affect your credit score in several ways. Here are a few key factors to keep in mind before you decide to swipe your card.

• Credit Utilization Ratio: A large charge for sales tax can significantly increase your credit utilization ratio. This may temporarily lower your credit score until you pay off the balance and your utilization returns to normal.
• Payment History: Making a large payment on time demonstrates responsible credit management and can positively impact your payment history. This is a crucial component of your overall credit score, so ensure you pay the bill promptly.
• New Credit Inquiry: If you open a new card for this purchase, the lender will perform a hard inquiry on your credit. This can cause a slight, temporary dip in your score for a few months.

Alternative Ways To Pay Automobile Sales Tax

Paying at the Dealership

One of the most common methods for handling automobile sales tax is to pay it directly to the dealership as part of the vehicle's total purchase price. The dealer then remits the collected tax to the appropriate state revenue agency on your behalf. This approach consolidates your payments and simplifies the process, as the dealership manages the necessary paperwork and ensures the funds are correctly submitted to the government.

Direct Payment to the DMV

For private party sales, or in states where it's standard practice, you may be required to pay the sales tax directly to the Department of Motor Vehicles (DMV) or an equivalent state office. This payment is typically made when you register the vehicle and transfer the title. Most agencies accept payment via check, money order, or debit card, providing alternatives for those who prefer not to use a credit card for the transaction.

Choose the Right Card to Pay Automobile Sales Tax

Paying your automobile sales tax with a credit card can be a smart financial move, but only if you use the right one. A card with a generous sign-up bonus, a high cash-back rate, or a 0% introductory APR period can help offset this significant expense. With nearly 3,000 cards on the market, finding the perfect match can feel overwhelming. Kudos simplifies the process, helping you compare options to find the best credit cards for your specific spending habits and financial goals.

If you want to get more from your credit cards, Kudos is the premier free extension for online shopping. We're also currently offering $20 back after your first eligible purchase—just sign-up for free with code “GET20” and shop at a Boost merchant.

Frequently Asked Questions

Are there fees for paying car sales tax with a credit card?

Yes, most government agencies charge a convenience fee, usually a percentage of the tax amount, for credit card payments.

Will I earn credit card rewards on my tax payment?

Typically, yes. However, you should confirm that the value of your rewards outweighs any associated processing fees charged.

What happens if my credit card payment is declined?

Your vehicle registration will remain incomplete. You must provide an alternative payment method to settle the tax bill promptly.