Should I Be Paying Bills With a Credit Card?

Mortgage

As the highest monthly expense for most consumers, mortgages look like an easy way to achieve that credit card sign-up bonus or accumulate significant points.

Sadly, virtually no mortgage servicers will allow credit card payments. And they have a good reason: Lenders don’t want to bear the credit card fees for processing the payments.

If you are lucky enough to find a mortgage servicer that will allow you to pay your mortgage with a credit card, be prepared to pay a convenience fee that will likely exceed the benefits you’re hoping to get.

If you don’t mind a fee, third party services such as Plastiq might be a good option for you. For a standard 2.85% fee, the company charges your credit card and sends a check to your mortgage lender (or anyone else you might want to pay). Before using this type of service, you’ll have to calculate if the fee is worth the rewards.

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How to pay bills with a credit card

Setting yourself up to pay bills with a credit card can be simple, depending on the bill you want to pay. However, not all providers offer hassle-free credit card payments.

Types of bills that commonly allow credit card payments include:

  • Household utility bills
  • Subscription services
  • Fitness memberships
  • Cable and internet
  • Cell phone
  • Car insurance
  • Medical bills
  • Taxes

But when it comes to repaying certain bills, such as installment-based debt, paying with a credit card might be more challenging. A few examples are:

  • Mortgage or rent
  • Auto loan
  • Insurance
  • Student loans

If you’re determined to use your credit card for as many bills as possible, workarounds such as Plastiq might help. Plastiq is a third-party service that uses your credit card to pay your bills on your behalf for a flat fee. The company sends your payment as either a check, wire transfer, or ACH bank transfer.

Regardless of what type of bill you want to pay with a credit card, payment options will vary by provider. Always ask your provider whether they accept credit card payments and if there’s a convenience fee or processing charge to use a card.

U.S. Bank Cash+ Visa Signature Card

  • $200 bonus after spending $1,000 in eligible purchases within the first 120 days of account opening.
  • 5% cash back on your first $2,000 in combined eligible purchases each quarter on two categories you choose.
  • 5% cash back on prepaid air, hotel and car reservations booked directly in the Rewards Travel Center.
  • 2% cash back on one everyday category, like Gas Stations/EV Charging Stations, Grocery Stores or Restaurants.
  • 1% cash back on all other eligible purchases.
  • 0% intro APR on purchases and balance transfers for the first 15 billing cycles. After that, a variable APR currently 14.24% – 24.24%.
  • No annual fee

Why it’s the best for flexibility

With the U.S. Bank Cash+ Visa Signature Card, you actually get to choose the categories you earn 5 percent back in, and many common utility and bill payments are among the options.

While this bonus rate only applies to the first $2,000 you spend in the two categories you select each quarter, that’s more than enough to cover many common utility bills. Categories range from fast food and department stores to cellphone coverage and home utility bills.

You also earn 2 percent back in one category of your choosing among grocery stores, gas stations and restaurants, which covers even more everyday spending categories, all for no annual fee.

Ignoring Your Debt

Some folks get so stressed out or embarrassed by credit card debt that they stop opening their bills and pretend there’s no problem. It’s obviously a bad approach because, while you’re ignoring the bills, the ticking time bomb of interest rates is adding to the debt. In addition, if you miss a payment or two, the interest rate may shoot higher under the terms of the card agreement. 

You can call card companies if you feel overwhelmed and ask to renegotiate the terms of your agreement. You may be able to get the interest rate lowered, set up a payment plan, or get some of your debt forgiven. If your first call doesn’t work, keep calling back because a different customer service representative may allow you to negotiate a better deal. 

Your credit card issuer may be willing to negotiate the terms of your agreement.

Ignoring debt can also lower your credit score and spur debt collectors into action. With unsavory tactics often employed in this industry, you don’t want to do anything that puts you on their radar.

Finally, don't let embarrassment prevent you from taking action. You may assume that everyone else has their finances under control, but many other consumers face similar debt problems.

Which Bills Can I Pay with a Credit Card?

You can typically pay the following bills by credit card. Check with your providers to find out whether they charge a convenience fee to process your credit card payment. (If they do, it’s usually smarter to pay from your checking account.) And look at the company’s website or your paper statement to see what your options are.

  • Utility providers
  • Cable and internet companies
  • Cell phone providers
  • Subscription services

Typically, the following providers do not allow you to pay by credit card or charge fees for you to do so. Exceptions exist, however, so check with your providers if you’d like to pay these bills by credit card.

  • Mortgage companies
  • Auto lenders
  • Landlords
  • Auto and home insurance companies
  • IRS and state tax collectors
  • Student loan providers

Small business cards

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Chasing Credit Card Rewards

Credit card rewards are usually worth far less than the extra interest you’ll accrue if you can’t pay off the money you spend to earn those bonuses. You may, for example, receive one point for each dollar you spend, but you’ll probably need to redeem 5,000 points to get a $50 discount on a plane ticket. Since the interest charged on outstanding account balances often exceeds the typical 2% bonus, it may not be a worthwhile trade-off.

You should also avoid signing up for multiple credit cards, regardless of bonuses. If you already know you don’t manage credit cards well, don’t add temptation in the form of additional cards. It’s also easier to miss a payment deadline when you have more cards than you can manage. Remember, a few late fees or interest payments can quickly obliterate those sign-up gifts or rewards.

You can use your cards more frequently once you have your debt paid off and know how to avoid new debt. As long as you pay your balance in full and on time each month, there is nothing wrong with using credit cards instead of carrying cash, or in taking advantage of rewards like cash back or frequent flier miles. Just make sure those purchases fit within your monthly budget.

How Should You Pay If You Can’t Use a Credit Card?

When you can’t pay your bills using a credit card, you have several options with their own perks and downsides.

  • Direct debit: Also known as automatic debit, you may qualify for a lower interest rate with this payment method. Simply provide the merchant or service provider with your checking account information, and they’ll withdraw the necessary funds on the monthly due date.
  • Online bill pay: By giving your financial institution details on a lender or service provider, you can set up an automated bill pay schedule. It’s a great way to put all your bill pay information in one place, but it can take some time to set up.
  • Checks: They may not be automated, but because you need to write a check each time you make a payment, you can easily double-check that you have enough money in your account first.

Effect on Your Credit Score

Paying bills with your credit card can either help or hurt your credit score, depending on how you use your 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.

Travel cards

Explore the world and earn premium rewards with Chase Sapphire Reserve® or Chase Sapphire Preferred®. Compare travel credit cards and find your ideal travel companion.

Wells Fargo Active Cash Card

  • Earn unlimited 2 percent cash rewards on purchases
  • Earn $200 bonus cash rewards after you spend $1,000 in purchases in the first three months.
  • 0 percent intro APR on purchases from account opening and qualifying balance transfers from account opening for 15 months, followed by a variable APR of 15.24 percent to 25.24 percent variable
  • No annual fee

Why it’s the best for cellphone bills

The Wells Fargo Active Cash Card is an excellent credit card to use for your cell phone bill since you get cellphone protection when you pay your bill with your card. This coverage is good for up to $600 in protection against damage or theft per claim, but a $25 deductible does apply. On top of that, you’ll also earn 2 percent cash rewards on every cellphone payment.

The Active Cash offers a generous 2 percent cash rewards on purchases, making this a straightforward and potentially high-yield flat-rate rewards card. You can also earn a cool $200 in bonus cash rewards after spending $1,000 in the first three months.

Avoiding Convenience Fees

Some companies, especially utilities, charge a so-called convenience fee for when you pay your bill with a credit card. Depending on the amount of the fee, you may want to forgo paying that bill with a credit card and use your checking account instead. These fees can add up and make your rewards-points-generating strategy less worthwhile.

Subscription services

Pandora, Netflix, Spotify, Hulu and broadcast network subscription services encourage you to pay with a credit card, and there’s no fee. These are the perfect monthly bills to put on a credit card.

Commonly asked questions about using credit cards for bills

What bills can be paid with a credit card?

There are a lot of different bills you can pay with a credit card, but you should check with your creditors about their specific payment policies. You’ll often be able to pay utility, cable, internet, and mobile phone bills. It’s possible you will also be able to pay your taxes with a credit card and even pay your medical bills with a credit card. It’s less likely that you’ll be able to pay loans, other credit cards, or your rent with a credit card. But again, check with the companies billing you about the methods of payment they accept. There are some exceptions, and more and more companies are opening up to credit card payments.

Is it better to pay bills with credit or debit?

That all depends on your financial situation and your goals for paying bills with a card. If you pay with a debit card, the money comes directly out of your bank account. Although this is basically a cash payment, which means you don’t pay interest, using a debit card may result in card processing fees. You also don’t usually earn any kind of rewards for paying with a debit card. When you pay bills with a credit card, you can simplify your payment schedule and cash flow. Instead of making four or five payments for various bills at different times across a month, you can charge them all on your credit card and make only one payment each month to pay off that card. You have to be careful to pay off the balance each month to get around paying credit card interest on these expenses. If you can’t pay your balance, you will start accumulating debt that is often subject to high interest rates. Creditors may also add on a convenience or processing fee when you use a credit card. It’s up to you to weigh the pros and cons of using a credit card versus a debit card, but in general if you stop using your debit card, you’ll open yourself up to earning more rewards and also being better protected in the event of fraud.

Does paying a bill with a credit card count as a purchase?

In most cases, yes. Always check with the company that issues the credit card to be sure. However, most cards view bill payments as transactions. With rewards cards, you can earn points or cash back based on these transactions, as well.

How can I pay a credit card with a credit card?

Most credit cards will not allow you to make a payment with another credit card. However, you can open a new credit card with a long 0% intro APR and transfer balances from a high-interest card to this new one. This is a good strategy for reducing or eliminating the amount of interest you pay on credit card purchases. The best balance transfer credit cards generally give you anywhere between 12 and 18 months to pay down the card without interest charges. This enables you to more effectively chip away at the balance and it’s the primary way you would pay one credit card with another. Just remember you will also incur a balance transfer fee when you take advantage of this offer, but depending on the amount of your debt, it could still save you a lot of money.

When Should I Use a Checking Account to Pay My Bills?

Not all lenders or utility companies allow people to pay their bills with a credit card. Your landlord will probably not accept a credit card, and if they do, you’ll likely be charged a processing fee of 3% or so. That will almost always negate any rewards you might see from the card. A $1,000 rent payment could net you $20 in rewards with a 2% cash-back credit card, for example, but cost $30 in fees.

Sometimes paying with a checking account can actually save you money. Some providers offer a discount when you pay with a checking account, because they don’t have to pay for credit card processing. Call and ask if your service provider offers an incentive for paying in cash.

Bill autopay offers another advantage to using your checking account to pay bills. If you tend to pay bills past their due date, autopay helps you stay current and avoid late fees.

In addition, paying your bills through your checking account’s bill pay function may soon allow you to improve your credit score. Experian Boost is new tool that can track your utility and telecom payments and, if you show positive payments for at least three months, you’ll likely get an immediate boost to your credit score. Visit now to register.

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