Buy a Car on Credit?

No, it’s not BankingMyWay’s “Deals of the Week” column (that comes every Wednesday) but American Express’s offer that allows its customers to put the entire cost of a new car on their credit cards is the kind of deal that legends are made of — good and bad. Here’s the deal, and why bigger may not always mean better when it comes to card deals.

First, it’s only fair to state that American Express (Stock Quote: AXP) is at the top of the list of credit card companies when it comes to customer service. The J.D. Power & Associates 2009 Credit Card Satisfaction Study Rankings place AmEx number one in its rankings, with a score of 762 (out of a possible 1,000).

AmEx is also pervasive across the U.S. consumer landscape, with 54 million cards in circulation, according to the Nilson Report.

But allowing Americans to pay for an entire new car with a credit card comes when:

• American credit card debt reached $972 billion in 2008, according to Nilson.
• The national 60-day auto loan delinquency rate is up 1.2% from the third quarter of 2009 compared to the same period in 2008.

So, is it really a good idea for AmEx to encourage cardholders to pay for a new car completely with plastic? American Express certainly thinks so. Under the company’s American Express Auto Purchasing Program, cardholders can walk into a car dealer, pick out a vehicle and pay for it with the American Express card. Only eligible cardholders make the cut (i.e. you’ll need a sterling payment history and a stellar credit rating to qualify, which keeps higher-risk customers on the outside looking in).

AmEx customers pay no additional fee (thankfully) for using the card to buy the new car, and the customer can also earn big rewards points for paying for that new Cadillac with his or her credit card.