Credit cards offer incredible convenience. With just a quick swipe or a linked account, you can instantly buy something. It seems like a no-brainer to use that convenience for taking the hassle out of paying bills or buying something. But, is it a smart idea to pay your monthly bills with your credit card? Choosing to pay a bill with a card can have a significant impact on your general financial wellness. That’s why it’s important to consider the many factors of this decision before going ahead with it. Here are a few pros and cons.
Pros to paying your bills with a credit card.
- Automate monthly payments. Setting up automatic payments will help ensure payments are always on time.
- Build credit with a consistent monthly payment. Using a credit card for a monthly bill is a great way to ramp up a credit score. Just be sure to pay the bill in full and on time every time.
- Earn rewards for money that needs to be spent anyway. Using a credit card that offers rewards for a bill that needs to be paid anyway will help to pile on rewards without overspending.
- Budget easily. Paying with a credit card makes for easy tracking of monthly spending.
- Payments post promptly. Bill payments made via credit card will generally post within one or two business days. Contrast that with a check that needs to be mailed out, delivered to the correct party and then deposited and cleared until the payment is finally processed.
Cons to paying your bills with a credit card.
- There may be fees for paying the bill with a card. Pay close attention to the payment options on every bill; some service providers charge a processing fee for paying with a credit card.
- If your financial situation is strained, then this can make it worse. For members who are already carrying a sizable amount of debt, it may not be the best idea to charge a monthly bill to a credit card. To make this work, you have to plan ahead to make sure that you have enough money in your checking account to pay off the purchase when your credit card statement arrives. If you don’t additional interest fees will be added, putting you further into debt.
- Credit utilization may cross the threshold to an undesirable rate. One of the key components of an excellent credit score is a low credit utilization rate. For members with a minimal amount of available credit, charging too many bills to a credit card can cause their score to plunge.
- Interest may accrue. Members who cannot pay their entire credit card bill each month could be burdened with more accrued interest than they can afford if they choose to pay their monthly bills with a credit card.
Before deciding whether to pay a specific bill with a credit card, it’s best to check with your provider to find out if this is a viable option and if there will be a fee attached for paying with plastic. Typically, you would be able to pay your subscription services, phone bill, utility bills, internet provider and cable provider with a credit card without a worry of a fee.
Sometimes, paying bills with a credit card makes perfect financial sense. Before deciding which way to go on any bill, consider all the relevant factors detailed above to be sure you’re making the best choice.