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Sun-Times rehashes debate on buying cars with a credit card

November 17, 2010
Consumers chasing bonus awards

Dealers should dust off the merchant agreements they hold with credit card agents to confirm when and where they permit customers to purchase goods and services using plastic. 

Stephanie Zimmerman, author of a Chicago Sun-Times column called "The Fixer," on Aug. 6 responded to a reader who wants to buy a vehicle using most or all of his credit card’s $42,000 spending limit. He said one dealership said its policy capped such credit spending at $2,000.


Zimmerman responded that consumers can buy a new vehicle with a credit card, and dealers can’t set a maximum limit. Both statements are true, sort of, and dealers should make sure their merchant agreements suit them.  

Dealers can elect not to accept credit cards in their showrooms and they can appeal to limit the dollar amount paid by credit card for a vehicle, but both matters must be part of their agreement. MasterCard, for one, won’t permit retailers to impose artificial maximum acceptance values.


Consumers are increasingly interested in purchasing vehicles using their personal credit cards, to reap the cards’ bonus awards. The GM Flexible Earnings Card, for instance, provides for 1 percent cash back on every credit card purchase and up to 3 percent toward a new GM car, truck or SUV. 

Zimmerman wrote that dealers try to dissuade vehicle purchases by credit card because of hefty merchant fees. Creditors forbid merchants from adding a surcharge to the price of a product or service paid for with a credit card, or forcing the cardholder to pay any part of the transaction processing fee.


But dealers, more than most retailers, can be damaged by credit card customers who invoke their right to rescind a contract during the first 90 days after vehicle delivery. Also, American Express merchant agreements state that a dealer must provide full warranty for at least one year or 12,000 miles on new and used vehicles. 

Most dealerships accept credit card payments for repair work and deposits on vehicles. However, their merchant agreements can permit them to limit card acceptance to the service department, as creditors effectively recognize dealerships as two businesses in one. A growing number of dealers, hence, have amended their agreements to limit credit card use to one line of business, namely, parts and service.


Dealers who do not welcome Visa and MasterCard in their showrooms must not display those decals on their showroom windows, but they can in the service department. 

If a credit card company does agree—in writing—to limit the credit card amount in vehicle purchases, dealers should develop a customer disclosure explaining the store’s policy. The disclosure should be posted by the cashier’s window in areas that accept payment by credit card.


A disclosure sign, but not a window decal, also should be prominently posted in all areas, so everyone knows the dealership’s policy on credit card transactions.