Should I Pay My Bills With My Credit Card?

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When you receive your monthly bills from the utility companies, chances are you have the option of paying the balance with a credit card. Paying with a card is convenient, especially if you’re paying online or over the phone and don’t want to provide your checking account number. However, unless you plan accordingly, using a card to pay bills can cause unnecessary headaches.

Rewards

  • If you have a rewards credit card -- one that offers airline miles, points or cash back on your purchases -- paying your bills with the card each month can help you earn a substantial reward more quickly. However, this is only effective if you pay your balance in full each month. Setting aside enough cash each month to pay the entire credit card balance allows you to maximize the rewards without paying excess interest charges or reducing your available credit. Using your card this way also helps build a positive credit history.

Paying Online

  • Paying bills with a credit card might be a more secure option if you pay online or over the phone. Paying bills using a checking account or debit card can leave your account vulnerable to hackers, especially if your Internet connection is not entirely secure. Most creditors offer secure websites, but using a credit card offers an extra layer of protection and reduces your liability for fraudulent purchases. It is much easier to close a credit card account and get a new card than it is to replenish a drained bank account.

Emergencies

  • Using your credit card to pay bills, such as the phone, cable or electric bill, may be your only option if cash is tight. If you expect to have enough cash to pay the balance within a few weeks, using your card can help you avoid late fees, interest and penalties on the household bills. Paying with a credit card can also help you avoid having the utilities turned off, at least in the short term. If, however, your money issues are ongoing, you might be better off making payment arrangements with the creditors or seeking other types of assistance. Paying bills with your credit card will only rack up a large balance that you have to pay back later on and will reduce the credit you have available for emergency purchases.

Interest

  • Unless your credit card has a zero percent interest rate, carrying a balance on the card costs you extra money in the long run. If you don’t pay the full balance every month, the interest charges compound, and this causes you to pay more for your bills than you would if you just paid cash. If paying your bills on the card causes you to exceed your card limit, that too will cost you extra money in fees. Going over the limit could possibly lead the card issuer to lower your credit limit or close your account altogether, depending on your cardholder agreement terms.

Credit Score

  • Paying bills on your credit card and not paying the balance in full can also affect your credit score. A portion of your credit score is determined by your amount of available credit in relation to the overall amount of credit you have. Paying all of your bills with your credit card several months in a row, and only making minimum payments, reduces the amount of credit you have available, which in turn can lower your credit score.

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