How to choose the best credit cards for paying insurance premiums
Compare credit cards that allow you to make insurance premium repayments while still earning rewards.
Insurance premiums are a necessary part of life. While we hope never to need insurance, the costs of forgoing protection can be much higher. Credit cards that let you make insurance premium payments offer a silver lining, allowing you to accrue rewards as you pay your bills. This guide will take a look at the benefits of paying insurance premiums with a credit card, and compare credit cards that allow you to do so.
Compare credit cards for paying insurance premiums
How do insurance premiums work?
Your insurance premium is the cost of your insurance policy. You can find insurance cover for your home, car, health, life, travel plans and more. Insurance premiums are the way insurance companies maintain income flow and are generally charged as a monthly fee. You will typically be presented with the size of your insurance premium when you sign up for an insurance policy. It is your policy that dictates the premium amount. Premiums tend to be impacted by:
- How much you’re covered for
- How comprehensive your policy is
- The size of your excess
Insurance premiums can be tricky calculations, with countless factors at play. Each type of insurance will make different considerations. For example, life insurers and health insurers will consider your lifestyle, age, smoking habits and more, while home insurers will consider the type of building and where it is located. Be sure to ask about the size of the premium before you commit to a policy.
Benefits of paying insurance premiums with a credit card
There are a few benefits that come with paying your insurance premiums with a credit card. These include:
- Earning rewards points. Insurance premiums can cost hundreds or thousands of dollars and are repeat expenses. Being able to earn rewards when paying your premiums can mean an extra holiday or far greater cashback earnings. Charging larger expenses to your credit card amplifies reward opportunities.
- Cash flow. Being able to put your insurance premiums on a credit card can allow you to maintain a healthy and flexible cash flow. Instead of having to make a direct deposit from a savings account, and finding yourself strapped for funds, you can incorporate your insurance premiums into your monthly credit card bills.
- Convenience. Paying by credit card is a convenient option. Your insurance premium will show up in your monthly credit card statement, allowing you to easily track and manage the expense. You can also use services such as CardUp to help with making insurance premium payments via credit card.
How to choose the best credit card for paying insurance premiums
First, narrow your choices down to those credit cards that do allow you to earn rewards on insurance premium payments. Once that’s done, you should consider:
- Reward type. If you’re trying to earn extra rewards then be sure to choose a credit card that offers you the type of reward you are likely to make use of. Rewards can come in many forms, including air miles, points schemes, cashback and shopping discounts. Be sure to choose a credit card that provides you with the best rewards for your lifestyle.
- Fees. All credit cards have some associated fees and charges. These can include annual fees, late payment fees, cash advance fees, overspending fees and rewards program fees. Always check the terms and conditions attached to your credit card.
- Card features. If you’re after a certain feature, check that the card you want offers it. Features to look out for can include compatibility with mobile payments, global ATM access, complimentary airport lounge entry and more.
- Credit limits. Banks will typically allocate you a credit limit after assessing your financial circumstances. That being said, it can be fruitful to shop around. One card may offer you a limit of two times your monthly income while another may offer you three times that amount.
- Security. Most banks have safeguards and protective measures built into credit cards and payment processing systems. If you’re looking for a specific feature, such as SMS verification codes, one-time passwords or a transaction alert notification, then be sure your desired card offers the feature before signing up.
What to look out for when using a credit card to pay insurance premiums
While paying your insurance premiums by credit card can be convenient, there are some stumbling blocks to try and avoid. These include:
- Higher fees. Higher fees may be unavoidable. The benefits of a good rewards scheme and the ability to make insurance premium payments may be offset by a higher annual card fee. You’ll have to decide whether the benefits of a certain card outweigh the potentially higher associated fees.
- Squeezed credit limit. If you add insurance premium payments to your regular monthly credit card expenses, you could quickly find yourself nearing your credit limit. Be sure that charging insurance premiums to your credit card won’t cramp your financial freedom afterwards.
- Interest rate charges. If you do push too hard against your credit limit and fail to make a credit card repayment as planned, you could face high interest rate charges. These rates can go well above 20%. As enticing as extra rewards can be, don’t put insurance premium repayments on your card if it will cause you to face interest payments you can’t meet.
How to check if a card offers rewards for paying insurance premiums
Checking whether or not your chosen credit card offers rewards for paying insurance premiums can be a simple task. There are three ways to go about it. These are:
- Read the terms and conditions. You should do this for every credit card you apply for. In this instance, you’re checking for the fine print that states whether or not you can earn rewards on insurance premium repayments.
- Exclusions list. Most rewards programs will have an exclusion list. Exclusion lists state the conditions under which you will not earn rewards. Exclusions may be purchases from certain merchants, purchases at certain times or certain types of expenditure, such as insurance premiums. If insurance premium payments pop up on an exclusion list, you won’t earn rewards for these payments.
- Ring your bank. You can ring your bank and ask whether or not insurance premium payments made by your credit card will accrue rewards. It’s best to ask them to point out where in the terms and conditions it states this, just so you have a written indication.
If you’re already making insurance premium repayments, it can be highly beneficial to earn rewards on those expenses. It’s best to be organised, find the right card and be certain that your finances are in order before you pay your premiums by credit card. If you want a credit card that earns rewards on insurance premiums then start comparing your options here.
Frequently asked questions
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