Credit cards can be useful for a lot of things, but are they the right payment method for your essential bills? When it comes to your utilities bill, student loans, mortgage, and subscription services, every bill comes with pros and cons when you pay with plastic.
When to Pay for Bills With a Credit Card
As a rule of thumb: You should only pay bills with a credit card because you can, not because you have to. If you have your spending under control and want to take advantage of credit card offers that you couldn’t get with a debit card, you may want to consider using a credit card to pay your bills.
Related Guide: When Is the Best Time to Pay Your Credit Card Bill?
However, if you find that you are putting your bills on a credit card because you are having trouble paying them with cash or money that is currently in your checking account, you should avoid using a credit card. Paying for bills with a credit card when you are already financially unstable can lead to long-term problems with money.
The fact of the matter is that credit cards inherently carry more risk than debit cards and cash. If you are not able to catch up on credit card payments, the consequences could be much more serious than an overdraft or late fee. It could lead to bad marks on your credit report, damage to your credit score, your delinquent payments being sent to a collection agency, and loss of access to loans and other financial products and services.
Pros of Paying Bills with a Credit Card
Paying bills with a credit card can have its benefits as long as you manage your credit card balance.
Earn rewards
If you have to pay bills anyway, why not get rewarded for them? Many cards these days offer perks like cash back or travel reward points 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.
Track and pay easily
By paying all of your bills with one credit card, it can be easier at the end of the month to know where your money is going. Your essential bill payments will not be mixed in with everyday expenses, making it easier to track. When your credit card payment is due, you can make one single payment to settle your balance and start from scratch the next month. Paying bills with credit cards also eliminates the need to have cash on hand or call your biller to make a payment.
Make the most out of a new card
If you open a new credit card and need to expense a certain amount in order to earn a bonus, you can charge bills to the card. Some credit cards offer introductory bonuses of several hundred dollars if you charge a certain amount to the card within a certain period of time. This method works best if you pay off your balance in full each month and don’t allow your bill to accrue interest.
Cons of Paying Bills with a Credit Card
Just as there are positives to paying with a credit card, there are downsides as well.
Pay balance in full
If you choose to pay your monthly bills with a credit card, it’s important to settle your credit card bill each month. Otherwise, interest charges will accrue and you’ll end up spending exponentially more on essential 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.
Convenience fees
Of the billers who accept credit cards as a valid form of payment, some charge a fee if you pay with credit. It’s actually the credit card issuers that charge fees to process your payment, but billers often pass those charges on to you. Convenience fees for residential customers usually cost $1.50 or more per transaction. Business credit cards tend to charge even higher convenience fees.
Not accepted by all billers
If at this point you are thinking to yourself, “Yes, I have my finances under control, would like to earn rewards, and feel comfortable with paying my bills via credit card,” it’s not that simple. Some billers don’t accept credit cards as a method of payment, leaving you only with debit, cash, or paying over the phone.
Can You Pay These Bills With a Credit Card?
Not all billers treat payments with credit cards the same. Some home or apartment rental companies may allow you to pay with plastic while others will not; some utility companies may charge you a convenience fee while others will absorb the cost. According to doxo, the most common household expenses in 2021 include:
- Mortgage
- Rent
- Auto loan
- Utilities
- Insurance
- Phone, cable, and internet
- Alarm and security
In general, this is what you can expect when it comes to paying different bills with a credit card.
Mortgage
The majority of mortgage lenders do not accept credit cards. Simply put: They do not want to deal with the convenience fees associated with processing. Once in a blue moon, you will find a mortgage lender that accepts credit card payments, but you can expect to foot the convenience fee.
There are third party services as well that make it easier to pay your mortgage via credit card, but the convenience fee attached to these services is often a percentage of your entire bill. In each of these cases, you will have to decide whether the fee is worth the convenience or perks that come with paying with a credit card.
Rent
Like mortgage lenders, landlords and rental companies typically prefer that you pay with check, cash, or direct transfer. Companies that accept credit cards are difficult to come by, though not impossible. If you do rent from a company that allows you to pay rent with a credit card, you can most likely expect to pay a convenience fee.
Auto loan
Lenders of car loans also typically don’t want to deal with the processing fees — are you starting to see the pattern? When you take out a loan, the lender wants the easiest, cheapest form of payment that will ensure their money is repaid. That usually means that you’re limited to paying with debit, by phone, by mail, or in person.
Utilities
Utility, gas, electricity, water, and trash removal companies have come around to the idea that customers prefer paying with a credit card. Some will allow you to pay your bills fee-free, while others may still charge the convenience fee. It’s best to check with your individual utility company to learn more about their payment policies.
Insurance
It’s usually easy to pay home, auto, health, and life insurance bills by credit card, however you may have to deal with the convenience fee. Some companies will waive these fees if you pay your premiums in full rather than in installments. If you’re interested in paying for your insurance with a credit card, contact your insurance provider to learn more about their policies.
Phone, cable, and internet
For both mobile phones and landlines, most service providers accept credit cards for monthly payments. The same goes for cable and internet providers. Better yet, these companies typically waive convenience fees and may even offer additional products, services, or rewards if you set up recurring automatic payments.
If television streaming services are more your jam, you will also have luck paying these bills with a credit card. Many of these service providers — such as Netflix, Hulu, and Disney+ — waive the service fees and make it easier for you to set up autopay using your credit card. If you’re considering autopay, it’s important to think about whether this form of payment works best for your finances and lifestyle.
Alarm and security
Home security companies typically allow you to pay your monthly bills with a credit card — and fee-free at that. Like phone, cable, and internet providers, many security providers acknowledge the convenience of credit card payments, though you should confirm with your service provider that you will not be charged a fee.
