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Debit vs. Credit vs. ACH: How to Pay Your Bills

Should you pay bills with a debit card or a credit card? It’s an age old question, or at least since debit and credit cards have been around. Traditionally, people have paid bills with cash or check, and that’s still an option. But with new, more efficient methods of payment, it’s easier than ever to make a payment virtually anywhere and have it get where you need it to go quickly.

A debit card or credit card are two of the more popular options, in addition to ACH (automated clearing house) payments, which allow billers to withdraw funds directly from your bank account using only your checking account number and bank routing number.

There are different reasons for why you’d use a debit card, credit card, ACH, cash, or check to pay your bills, and each method comes with their own pros and cons. When deciding how you will pay your bills, it’s important to consider a few factors:

  • Speed
  • Security
  • Convenience
  • Perks
  • Potential fees
  • Debt and credit score risk
  • How effective the method is for money management
Is it better to pay your bills with a debit card, credit card, ACH payment, check, or cash?

Debit Card

Paying bills via debit card is usually as easy as inputting your card and billing information. They have speed and convenience going for them, and debit also bodes well for money management. However, debit cards are not quite as secure as credit cards, they don’t come with perks, and there are fees to worry about.

Speed

Debit card payments are quick. Transactions are usually posted to your checking account within 24 hours, whereas paper checks and even some forms of digital payment can take 72 hours or more.

Security

If you make a payment with a debit card on a biller’s website, chances are the company has built in security and fraud monitoring measures to ensure that your personal and banking information is not compromised.

That said, debit card transactions are not as safe as credit card transactions. In recent years, there has been a rise in “skimmers” — card readers disguised as parts of the ATM or POS machine. It is also relatively simple for a fraud to steal your PIN or access your information via e-commerce transactions.

It’s best to be wary of using your debit card for online transactions, whether for bill pay or online shopping. If nothing else, it’s more difficult to dispute a fraudulent purchase made with a debit card than it is for one made with a credit card.

Convenience

Paying a bill with your debit card is as convenient as paying it via credit card or ACH — far more than walking or driving an envelope with a cash or check inside to the post office. People these days have their debit cards near them most of the time, making bill payment with a debit card a breeze.

Perks

Unfortunately, paying with a debit card means you’re paying bills with the money that is currently in your account. Many of the perks that come with bill pay are associated with credit cards, as these offer travel rewards, cash back, and shopping discounts when you charge a certain amount to your card.

Some billers offer discounts if you set up automatic payments using your debit card or bank account information. However, you should carefully consider whether autopay aligns with your financial needs and lifestyle before setting it up.

Potential fees

Debit is linked to your checking account, and if you do not have enough money in your checking account to cover a bill payment, your bank will likely charge you an overdraft or non-sufficient funds (NSF) fee.

Americans paid a collective $12.4 billion in overdraft fees in 2020. While not all of that can be attributed to overdrafts due to monthly bills, a recent doxoINSIGHTS report estimates that American households spend on average $117 in bill pay–related overdrafts each year.

Debt and credit score risk

When paying with debit, you are not gambling with creditors’ money, so you do not have to worry about debt or credit damage (for the most part).

You could run into issues if you overdraw your account for a significant period of time and your financial institution is forced to report your delinquent account to a collections agency. Collections accounts are reported to the credit bureaus and significantly affect your credit scores.

Money management

Debit payments allow you to conduct transactions with money that is currently in your account — no more. This makes it easy to know how much money you have at your disposal, how much you can spend on bills, and how much you are free to spend on discretionary purchases after you’ve taken care of the bills.

Credit Card

If you pay bills with a credit card, you’d be taking on a bit of risk. With proper money management, though, you could reap the benefits. Credit card payments are faster, more secure, more convenient, and have perks. However, credit card payments also come with potential fees if you do not make a credit card payment in full. Paying with a credit card also puts you at greater risk for debt and credit damage.

Speed

When paying with a credit card, you can count on a quick turnaround. Credit card payments have speed on their side compared to paying with cash or check.

However, when you pay bills with a credit card, you should be wary of processing times. Electronic payments are quick but typically require 1–3 business days to post to your account.

Security

A credit card is one of the safest forms of payment. Since a credit card is not linked with your personal account, it provides a layer of security between your transactions and personal finance management. There is always some element of risk when you digitize your finances, but it’s not necessarily any less safe than keeping your money in a paper bag under your bed. Credit cards operate with strict security features, such as encryption and fraud monitoring, that keep you and your money safe.

Convenience

Credit card payments are convenient in the sense that you do not have to sit down, write out a check, attach a stamp, take it to the post office, and await its arrival and processing. When paying with a credit card, you can more or less make a payment from the comfort of your own home by simply entering your credit card details.

However, that convenience can come with a price. Of the billers who accept credit cards, some charge a fee. It’s actually the credit card companies that charge fees to process your payment, but billers often pass those charges on to you.

Unfortunately, not all billers accept credit card payments. Even if you are willing to take on the fee, some billers and lenders would rather not mess with the processing and convenience fees imposed by financial institutions. Instead, they require you to pay with debit, ACH, cash, or check.

Perks

Many cards these days offer perks like cash back or travel rewards when you charge purchases to your credit card. By paying for bills like utilities, phone, internet, and other essential services with a rewards credit card, you can unlock high-dollar benefits with little to no effort.

Potential fees

In addition to convenience fees, you may be on the hook for other costs from your credit card company when paying with a credit card. The biggest culprits are credit card interest and late fees.

If you pay your monthly bills with a credit card, it’s important to settle your credit card bill in full each month. Otherwise, interest charges will accrue and you’ll end up spending exponentially more on monthly bills than you had originally planned. This is why it’s important to only pay bills with a credit card if you are sure that you can pay them off at the end of the month.

If you don’t make at least the minimum payment on your credit card bill at the end of each cycle, you could incur a late fee from your credit card issuer. Paying bills with a credit card can come with a lot of unintended costs if you do not manage your finances responsibly.

Debt and credit score risk

Credit card interest isn’t just a few extra dollars that you have to pay if you don’t settle your credit card bill — interest grows, and it grows quickly. Anytime that you do not pay off your credit card balance in full, your debt grows exponentially and can dig you into a deep personal finance hole.

Debt also affects your credit. Lenders and some billers report debts to the credit bureaus, which ends up on your credit report and affects your credit scores. The more debt that you have, the more negatively it can affect your score, especially if you are not making on-time payments or managing your credit utilization ratio.

Money management

If you have decent money management skills, paying bills with a credit card shouldn’t be any more difficult than paying by debit card or check. However, paying for things with a credit card is inherently risky and makes it difficult to manage money since you are spending money that is not yours.

When you get approved for a credit card, the issuer approves you to borrow money up to a certain limit. While it may be tempting to borrow up to that limit, it is actually bad for your credit utilization and your credit scores.

Woman makes electronic ACH payment with a bank account card on her laptop

ACH Payment

An ACH payment is a transaction between two parties in which money is moved from one account to another using account numbers and bank routing numbers. ACH payments are quick, secure, and convenient. They also have lower debt and credit risk, and they make it easier to manage your money. Unfortunately, there are no perks involved with paying bills via ACH, and you may incur bank fees.

Speed

There’s a fairly complex process after you click ‘Pay Now.’ However, compared with check and cash payments, ACH transactions travel from here to there relatively quickly.

That said, ACH payments may travel slower than debit. When someone makes a payment with a debit card, they enter their PIN or provide a signature in order to authorize the transfer of funds. While this process can have security issues, the funds are typically processed and transferred much quicker than they are with ACH payments.

Security

Yes — ACH payments are secure. The National Automated Clearing House Association (NACHA) governs all transactions in the ACH network. According to its website, the organization “develops rules and standards, provides industry solutions, and delivers education, accreditation, and advisory services” to ensure that electronic payments are securely sent and received between parties. NACHA has developed strict operating guidelines for participants within the ACH network.

Convenience

Also similar to debit and credit card payments, ACH bill payments can be completed from the comfort of your own home and do not require a trip to the post office.

You can also set up recurring automatic ACH payments to make bill pay even more convenient. Each time that a bill is due, your biller or lender will automatically charge your account. However, if you set up autopay, it’s important to make sure that there are sufficient funds in your account when it’s time for the biller to charge you. Otherwise you’ll run into an overdraft or late fee.

Perks

There are no additional perks associated with paying bills with ACH. If you set up automatic payments, some billers will reduce your monthly bill or interest rate; however, there are not necessarily any travel rewards or cash back opportunities like there are when you pay with a credit card.

Potential fees

ACH transactions are similar to debit in that money is directly deducted from your bank account. This means that if you do not have enough funds in your account, you may get stuck with an overdraft fee or NSF fee depending on if your bank decides to cover your transaction or not.

Debt and credit score risk

ACH payments are deducted from your bank account using your account and routing number, meaning that you’re really only able to use the money that is in your account and not money lent to you by a creditor. Therefore, debt is not a typical issue with ACH payments.

The only reason that debt or credit damage would come into play would be if you overdrew your account a significant amount, left it overdrawn for a long time, and your financial institution was forced to report your payment to a collection agency. Collections accounts wind up on your credit report and do a significant amount of damage.

Money management

ACH payments are ideal for money management. With the bills coming out of your bank account rather than a credit card account, it’s much easier to budget for the money that you have — not the money that you have access to from your creditor.

Check

Paying by check is not the most modern form of bill payment, but it’s still a viable option. Given that you usually have to mail or hand deliver a check to a biller, payment by check is not the quickest or most convenient form of payment. You may also be subject to fees if you do not have sufficient funds in your account when the biller attempts to cash the check.

On the bright side, checks are a relatively secure form of payment (as long as it gets to your biller’s doorstep safely) and works well for money management.

Cash

Cash is arguably the most straightforward way to make a bill payment. It gets the job done, but in the grand scheme of things, it’s not the most effective or efficient payment method. Cash works well for money and debt management because you’re dealing with cold, hard cash, not virtual, borrowed money. However, paying with cash is not necessarily quick, convenient, or secure.

Cushion helps you waste less money, save more, and live a financially healthier life. We monitor your bank and credit card accounts 24/7, find and alert you about pesky fees, let you know which fees are negotiable, which banks are cooperative, and can even automatically negotiate on your behalf.* To date, Cushion has secured customers more than $11 million in bank and credit card fee refunds—and we’re just getting started.

*Cushion only negotiates fees with high refund odds. We cannot guarantee any negotiations, a regular frequency of negotiations, or fee refunds—your bank makes the final call.

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