Using a Credit Card to Pay Monthly Bills
Paying bills with your credit card to earn rewards or to better manage your finances makes sense as long as you follow one simple rule: always pay your balance in full each month. If you’re paying bills with your credit card because you can’t afford to pay with money from your checking account, it’s a sign of a bigger financial problem that can get worse if you let it become a habit.
Many people have trouble juggling bill payments because of receive weekly or bi-monthly paychecks. In that case, using your credit card can help you better manage your bills - as long as long as you don't carry those bills into the future.
How to Pay Your Monthly Bills With a Credit Card
The last thing you want to is wreck your finances because you're trying to earn more more credit card rewards. Here are some tips to pay your bills with a credit card without hurting your credit score or going into debt.
Start with a zero balance and always pay in full.
Before you switch to paying your bills with a credit card, pay off your existing credit card balance. That way, you start with a zero balance and you can take advantage of the credit card's grace period to avoid paying interest. Otherwise, if you use a credit card that has a balance, finance charges will be added to your balance each month, making it more expensive to pay your bills via credit card.
Don’t use too many different credit cards.
It’s easier to manage your balance if you use just one credit card to pay your bills rather than trying to juggle bills on multiple credit cards. Choose the credit card with the highest credit limit and the best opportunity for earning rewards. The more credit cards you use for paying bills, the harder it becomes to track and manage the balance across all your credit cards. It’s not impossible, but you have to be more diligent about keeping up with your balances and making sure you’re not spending more than you can afford.
Watch your available credit.
If you’re planning to pay all your monthly bills with a credit card – or at least the bills that can be paid with credit card payments – make sure there’s enough credit available on your credit card. Many credit card issuers have eliminated penalty fees for exceeding your credit limit, but the high balance could hurt your credit score if it’s reported to the credit bureaus (your balance on your statement closing date is typically what gets reported to the credit bureaus). You can free up credit throughout the month by making additional payments on your credit card.
Keep the money for the bills available in your checking account.
Just because you’re paying bills with your credit card doesn’t mean you can splurge the money in your checking account. Instead, keep this money available so you can pay your credit card balance in full when the due date rolls around. That way you’ll avoid debt and save money on credit card interest.
Keep an eye on your credit card balance throughout the month so it doesn't exceed the available balance in your checking account.
Avoid paying expensive convenience charges.
Some companies charge a convenience fee for when you pay your bill with a credit card. Depending on the amount of the fee, you may forgo paying that bill with a credit card and use your checking account instead. You may justify a one-time fee convenience fee, but keep in mind that fees add up, especially if you’re paying them on multiple bills.
Which Bills Can You Pay With a Credit Card?
You may not be able to pay some bills with your credit card. You can typically pay your cell phone, some utilities, cable, and internet with your credit card. You may be able to pay your rent with a credit card, but it depends on whether your landlord accepts credit cards. Larger property management companies are more likely to accept credit cards. Make sure there’s no expensive convenience fee for paying your rent by credit card.
Companies that let you pay your bill by credit card typically let you make a payment online or by phone. You'll have to give your credit card number and expiration date and at least your billing zip code. Some companies may ask for your complete billing address and the security code on the back of your credit card (front of your American Express.)
You won’t be able to pay your credit card bill with another credit card. Also, many auto and mortgage lenders also don’t take credit cards for payments. You’ll have to use your checking account to pay any bills that don’t accept credit cards.
Don’t be tempted to use a credit card convenience check to pay bills that wouldn’t normally accept a credit card. There’s no benefit to doing it this way and it can get expensive. Convenience checks are treated as cash advance transactions and your credit card issuer probably doesn’t pay rewards on cash advances. What's more, you’ll pay a cash advance fee on the transaction and you’ll start incurring interest starting from the day the check is cashed.
Will Paying Bills With a Credit Card Impact Your Credit Score?
Paying bills with your credit card can either help or hurt your credit score, depending on how you use your credit card. Maxing out your credit card and missing credit card payments can hurt your credit score. Paying your bill on time each month helps your credit score.
Even when you’re paying bills with a credit card, you still need to budget and track your spending as you normally would. These basic financial habits are key to keeping your spending in check, avoiding fees, and protecting your credit score.