Is It Smart to Pay Bills With Your Credit Card?

Using a credit card has become a convenient way to make purchases both online and in-stores. Credit cards can also be used to pay bills, which could be helpful for both you and your credit score when used responsibly. Let’s take a look at how to pay bills with a credit card in a way that could benefit you.

What bills can you pay with a credit card?

Many bills can be paid with a credit card. Just be mindful that some companies add a convenience or processing fee in order to do so. When you make consistent payments each month, paying bills with a credit card can be a great way to grow your credit. It can be a really good system for bills you were going to pay in full anyway. Remember it’s never a good idea to use credit cards if it causes extra spending or debt.

Here are some types of bills that credit cards can be used for:

• Utilities and monthly household bills
• Cell phone, internet and cable
• Streaming services
• Fitness memberships
• Medical bills
• Rent
• Car Insurance

If the company accepts credit cards, there will sometimes be a processing fee that could increase your total cost each month. However, some credit cards offer rewards (such as a Cash Back Bonus) that could outweigh the con of these fees. Be sure to check with your billing company to see if there are any fees associated with paying bills with a credit card as well as any benefits.

You might be wondering, “Can you can pay utilities with a credit card?” or “Can you pay the electric bill with a credit card?” Most electric, gas, water and trash removal companies allow customers to pay by credit card. Some charge a small convenience fee for this option, while others don’t. It’s an easy way to earn credit card points on an expense you’re already paying for. Just be sure to pay your credit card balance in full every month. Otherwise, you could end up spending extra on interest.

It’s important to consider if using a credit card to pay your bills can hurt or help you. You should also consider if there are any bills you have that are unable to be paid by credit card. For example, depending on your lender, some personal loans cannot be repaid by credit card .

But don’t just ask, “Can I pay my bills with a credit card?” Also consider what the credit card payment can help you achieve by paying your bills.

Pros and cons of using a credit card to pay bills

So, should you pay bills with a credit card? Consider the pros and cons and how they can be applied to you. Your financial situation is unique to you, so deciding whether or not to use a credit card to pay bills is an individual decision.

Advantages of paying bills with a credit card:

• It's quick, convenient, and you can do it almost anywhere. Once you've used your credit card online to pay a bill, most websites allow you to securely store your payment information so you don't have to re-enter it next time.
  
  
• You can set up automatic credit card payments. Automating payments is a great way to manage your budget and alleviates the concern about missing a due date or making a late payment. Many companies will also work with you on the payment cycle and set a recurring monthly payment date that is convenient for you.
  
  
• You can earn cash back or other rewards. Check to see if your credit card offers these rewards and what exactly the reward is. While many credit card issuers only offer 1% back, some offer up to 5% , so if you choose to pay bills with a credit card to get cash back, choose the card you use wisely.
  
  
• Tracking your spending is easy. Many credit card companies provide you with free reports that divide your charges into spending categories. That can be a helpful budgeting tool, tracking how much you're spending on bills like insurance, phone, cable and internet service, utilities and more.
  
  
• Build a good credit history. By actively making on-time payments in full, you can build your credit score with a credit card. That could make lenders more likely to loan you money, as well as offer a good interest rate.

Disadvantages of paying bills with a credit card:

• You could end up paying more. If you do not pay off your credit card bill on time and in full every month, you will be paying your bills plus any interest that accrues, which can cost you significantly more in the long run. In addition, some companies charge you a fee to pay bills with a credit card. In some cases, it's only a few dollars, but in others, it's a percentage of the amount you charge. The bigger your bill, the higher the fee that's added on.
  
  
• You could see a negative effect on your credit score. Adding your bills on top of the purchases you've already made could bring you too close to your credit limit, which can have a negative impact on your credit score. You should strive to use less than 30% of your available credit on any card. For example, if your credit limit is $2,000, try not to use more than $600 of that available credit.

So, should you pay bills with a credit card?

Since everyone’s financial situation is different, determining whether or not to pay bills with a credit card requires an individualized approach. At OneMain Financial, we’re here to help you feel confident in using your credit card.

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This article has been updated from a previous posting on November 28, 2018. Matt Diehl contributed.