Can You Pay Bills With a Credit Card?
Key points about: paying bills with a credit card
You can pay some bills with a credit card, such as utility, phone, and medical bills.
A credit card cash advance or balance transfer may be options for bills you can’t typically pay with a credit card.
Paying a bill with your credit card can incur interest charges if you don’t pay the full amount by your card’s due date.
These days, many companies allow you to pay bills with a credit card. Charging your bills may help streamline your bill-pay process, and you might even earn rewards for your spending. But you’ll need to pay off your credit card balance in full each month to avoid paying interest. Consider these points about using your credit card when paying bills:
What bills can you pay with a credit card?
You may be able to pay a wide range of bills with a credit card, including utility, phone, cable, internet, streaming subscription, insurance, and medical bills. Keep in mind that some companies charge a convenience fee for paying with credit. You can check with billing departments to verify payment policies.
Other ways to pay bills with your credit card
There are bills you can’t typically pay with a credit card, like mortgage, student loan, and auto loan payments. But there are ways to utilize your credit card to pay these and other expenses.
Some credit cards allow you to take a cash advance, where you borrow cash against your credit limit. There is usually a cap to how much cash you can borrow, and interest charges (usually at a rate higher than your purchase interest rate) and fees apply. In addition, interest charges often start the day you withdraw the cash from your credit account, making this form of borrowing a costly option for paying bills. It may be best to save a cash advance for emergencies.
Another option for paying certain loans with high interest rates is a balance transfer to a credit card with a lower interest rate. Most balance transfers charge a fee (usually a percentage of the amount you are transferring). But taking advantage of a lower interest rate can help you pay your debt off quicker. Some credit card companies offer new cardmembers low introductory rates.
To do the math, if you have a $2,000 balance to transfer and a 0% introductory rate for 15 months with a 3% balance transfer fee, you can pay off your transferred debt in 18 months with a $138 monthly payment.
Should you pay bills with a credit card?
There are pros and cons to paying bills with a credit card. Weigh the good against the bad to decide if it’s the right move for you. Here’s a breakdown of what to consider:
- You could earn rewards: Rewards credit cards like those from Discover generate cash back or miles you can use toward gift cards, travel, and more. If you have a card that pays cash back on every purchase, using it to pay bills could put some of what you spend back in your pocket.
- Paying with a credit card can help you pay on time: Setting up automatic bill pay using your credit card can make it easier to pay on time by taking the guesswork out of due dates and helping ensure you have the funds to cover a bill.
- Paying bills with your credit card can help you budget: When charging all your bills to one credit card, it may be easier to track what you owe and budget a lump sum to cover your expenses at once (when you pay your credit card bill at the end of the month).
- You might run into fees:
Did you know
Some companies charge a processing fee when you pay your bill with a credit card. You’ll have to weigh fees against the potential rewards you may earn using your credit card. Ultimately, the fees may be hard to justify.
- Interest charges can apply if you carry a balance: If you charge your bills to a credit card but fail to pay your balance in full by the due date, you could pay interest on top of what you already owe. And if you carry a balance, you’ll pay compounding interest (interest charged on unpaid interest). If it means taking on more debt than you can manage, paying with a credit card may be too costly an option for covering a bill.
How to pay bills with a credit card
If you’re planning to pay bills with a credit card, here are a few best practices to keep in mind:
- Consider limiting your bill pay to one card: Choosing one card for all your bill payments may make tracking and managing your spending easier than spreading payments over several cards
- Plan to pay your credit card in full each month: Paying interest on a bill increases the expense and can diminish the value of rewards you may earn. Paying your balance in full each month ensures you won’t pay interest.
- Keep an eye on your credit utilization ratio: Your credit utilization (the amount of your total available credit in use) is one factor that impacts your credit score. You may harm your credit score if you carry a sizeable monthly balance from bills or other purchases.
There’s no denying that a credit card can come in handy when paying bills. But it’s important to understand the dynamics of paying with credit before you decide to charge.
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