Paying vehicle insurance premium upfront vs. monthly installment: Does paying upfront avoid interest charges?

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  • #95266 Reply

      I was having a conversation with a friend regarding vehicle insurance, she was saying she would save for 6 months and pay the premium all at once, but she was also complaining about interest rates in her cc.

      I ask if they charged interest on the auto insurance if not paid all at once, she said no and no convince fees. So to me it makes sense to pay the saved money to the cc and pay out the insurance.

      Just some food for thought.

      #95267 Reply

        Every insurance plan I’ve ever had charged more if paid by the month.

        #95268 Reply

          They may not charge interest or fees, but the rate is still cheaper with a longer term. So, her insurance would cost more money if she paid it monthly.

          Regardless, there is no extra money here. Even if it cost the same to pay it monthly, she wouldn’t have extra money to pay on her credit card instead of her auto insurance.

          Now, if she is paying insurance with her credit card, the wise thing would be to budget for this monthly and then pay cash/check for the 6 month premium to take advantage of the term discount and not pay interest. If she pays $1200/6 months, she should be saving $200/mo towards her car insurance bill so she has the amount saved when her renewal is due. If she can’t do that right now because of credit card debt, she should be working towards doing that by looking at her budget, but if she is barely making ends meet and is using her charge card to do so, reducing the term and making a bill more costly isn’t the answer.

          Useful: I need you best tips and advice on shopping around for car insurance

          #95269 Reply

            I’m guessing she doesn’t really know. I’m 53 and I get an additional fee a $3 a month for paying monthly and not twice a year.

            #95270 Reply

              We pay ours every 6 months and receive a discount for doing so.

              #95271 Reply

                My insurance charges $8 a month if I pay it out. So I pay 6 months all at once.

                #95272 Reply

                  My home insurance doesn’t charge a fee for autopaying monthly, nor does it give a discount for paying all at once annually.

                  But our auto insurance gives a pretty good discount for paying it once annually (same company).

                  Unfortunately, I have both due along with property taxes in January which makes it a really tough month each year!

                  #95273 Reply

                    My company gives a discount for paying it upfront. But doesn’t make financial sense if she puts it on a credit card and doesn’t pay the balance when the bills comes in, the interest on the card probably far exceeds the discount.

                    #95274 Reply

                      Mine is billed every 6 months if I want to pay half then the other half 2 months later there is a $5 fee added to the 2nd payment.

                      This helps when my car insurance comes due in November when my property tax is also due.

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