When you make purchases with your credit card, you can earn valuable cash back, miles, and points that can be used to offset credit card bills, cover travel expenses, and grow your savings.
While swiping your card at the grocery store or gas station is easy, paying your monthly bills with a credit card can be more complicated. Before you get started, here are a few things to keep in mind.
Here’s what you need to know about the pros and cons of paying your bills with a credit card and how it can affect your credit.
What bills can I pay with a credit card?
Certain invoices can be paid by credit card. The following service providers typically accept credit cards as a form of payment:
That said, the following bills generally can’t be paid with a credit card, but there may be some workarounds:
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Paying rent
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Mortgage payments
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Car Loans
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Student Loans
Third-party services like Plastiq allow you to pay mortgage and car loan lenders with a credit card, but the process is complicated and there are usually fees that make it not always worth using a card.
Additionally, there are some special options available to pay these fees with a credit card, such as , a rewards credit card designed specifically for paying rent.
Benefits of paying bills with a credit card
Using a credit card to pay your monthly bills offers some perks, but also adds risks to consider. Weighing the pros and cons can help you decide if it’s right for your situation.
Earn rewards for regular spending
Paying your bills with a credit card will help you accumulate points faster. Let’s say you have a credit card that earns 2% points on all your spending, and you pay $1,000 in bills with your card each month, that’s $20 extra in points each month.
If you use your card to pay bills, you can sometimes hit the minimum spend and earn a generous welcome bonus. Many rewards cards are worth hundreds of dollars, so paying for recurring monthly expenses can make it easier to earn these bonuses.
Build trust
Another benefit of paying your bills with a credit card is that it gives you the opportunity to make payments on your credit cards, which can be helpful if you have a poor credit history or have struggled to maintain credit in the past. Paying your bills this way can help you build a good payment history, as long as you don’t miss or late credit card payments.
Ensure on-time payments
If you have a tendency to forget to pay your bills, setting up autopay with a credit card can help you pay on time. And if you don’t have much money in your checking account, using a credit card can help you avoid accidentally forgetting to pay an autopay or incurring fees for insufficient funds.
Disadvantages of paying bills with a credit card
Using a credit card to pay your monthly bills may have some perks, but it also has drawbacks.
additional fee
Service providers may charge a fee for paying with a credit card. This fee can be a fixed amount or a percentage of the total invoice amount, depending on the policy. If the fees associated with this payment method outweigh the potential benefits, it probably makes more sense to use a credit card.
If you’re thinking about paying your bill with a credit card, check your service provider’s policies to see if there are any fees that apply.
Increased credit utilization
The amount of revolving credit you’re using compared to your available credit limit can have a big impact on your credit score. Charging a monthly bill to your card can increase your credit utilization ratio, even if you pay your balance in full each month.
This can have a negative impact on your credit, as low credit utilization is valued under typical credit scoring models. Debt amounts account for 20% of your VantageScore and 30% of your FICO score.
Interest
Similarly, paying your bills with a credit card can increase your interest if you don’t pay it off in full each month. Credit card interest rates are typically high, often up to 29.99%, so interest can add up quickly.
Can paying bills with a credit card lower my credit score?
Paying your bills with a credit card can either hurt your credit score or help it. It depends on your spending and payment habits. If you always pay your credit card balances in full and on time, paying off your card may work to your advantage. A good payment history can improve your credit score over time.
In contrast, if you normally only pay the minimum payment on your cards, paying your bills with a credit card can lower your score and cost you money. Increasing card expenses increase your credit utilization ratio, which in turn increases interest if you don’t pay in full.
How to pay bills with a credit card
If you’ve decided to pay your bills with a credit card, get started now! Your next steps depend on how you want to pay. Depending on your bill, you might be able to pay in person, over the phone, or online. Here’s a sample process if you pay online:
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Log in to your account
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View billing options and see additional charges
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Select “Credit card” as your preferred payment method
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You can also enter your card details to make a one-time payment or set up automatic payments
Making regular payments with a credit card can come with perks, like more rewards and a better credit score, if you use the card responsibly. But this payment method also has drawbacks, like fees. It can also lead to a higher credit utilization ratio and higher interest costs. Consider the perks and fees, as well as your credit card payment habits, to decide whether it makes sense for you to make payments with a credit card.
Frequently Asked Questions (FAQ)
Is paying bills with a credit card a good idea?
Whether or not paying your bills with a credit card is a good idea depends on several factors. Consider the potential perks, fees, usage of your available credit, and payment habits before deciding whether this payment method is right for your situation.
Which bills cannot be paid by credit card?
Typically, you can’t pay your mortgage, rent, car loan, student loan, or other loans with a credit card. Services like Plastiq can, but the cost of using these services can exceed the total credit card points you earn.
Can I pay for car insurance with a credit card?
Yes, you can usually pay your car insurance premiums with a credit card. Check with your insurance company to see if this is an option for you and, if so, what fees may be charged.
