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With national household credit card debt at historically high levels, it may not seem prudent to discuss the notion of using your credit card to pay your bills. While there are several advantages in doing so, their use always has the potential to create debt problems.
Of course, it ultimately comes down to an individual’s financial situation and his or her ability to manage credit. Anyone who periodically flirts with overspending on credit cards or resorts to making minimum payments is probably not a good candidate for this practice.
However, if your financial house is in order and you are able to live within your budget, paying your monthly bills with a credit card could make a lot of sense.
What Bills Can You Pay With a Credit Card?
When it comes to paying your bills with a credit card, most utility and service companies accept the payments. Most of them, including your cell phone carrier, auto insurance company, and cable company, encourage their customers to select automatic payments as their payment preference.
When your payment is due, the provider will automatically reach out to your account and deduct what it needs. In most cases, you are able to choose a payment method from among your checking account, debit card, or credit card account. You can make the same arrangement for paying your rent.
If your landlord works with a property management firm, it may accept credit cards. If not, you could arrange to make your rent payment through a third party rent payment service.
When Using a Credit Card to Pay Bills Makes Sense
You like the idea of putting your life on automatic pilot. Between your cell phone, IRS bills, Internet, cable, car insurance, utilities, water bills, student loans, and even mortgage it can seem like a lot to juggle and remember. When you use a credit card you can set them all up on automatic billing and not have to worry about overdrawing your checking account. You receive one bill each month from your credit card company and everything is done.
You like the idea of earning more rewards. With the right rewards card, every dollar spent towards your monthly bills can earn you additional rewards. As long as you pay your card balance in full each month, the rewards (whether cash back, points, or miles) are a complete win for your finances. Most rewards cards pay 1% cash back or points on miscellaneous purchases, but there are a few that pay up to 2%.
You like the idea of a better tracking system for your finances. Financial planners often recommend using credit cards for all purchases, including monthly bills, because they provide an excellent way to track and manage your expenses. Each purchase is recorded in real time and can be tracked online. Many credit card accounts include account management tools that allow you to create and track a spending plan.
When Using a Credit Card to Pay Bills Might Not Make Sense
You sometimes struggle with your finances. Using credit cards can have a downside, especially for people who have trouble managing their finances. While it’s great to consolidate all of your bills and maybe even your rent into one big monthly credit card payment, there is always the temptation of making a partial payment when things get tight and then pay the rest over time. That could be the beginning of an ugly debt spiral. While credit cards can help you better manage your finances, if you are often near the brink of cash flow problems, it could lead to debt problems.
You don’t like the idea of paying convenience fees. Some utility companies may charge a convenience fee when you use a credit card. This is to cover the merchant fees they are charged by the credit card company. If you pay rent through a rent payment app, you are usually charged up to 3% of your rent payment. That’s an extra 2% to 3% that could negate any advantage your rewards program provides. Always check to see if convenience fees are charged before signing up for auto pay. You can’t always get away with no fees!
When You Need to Pay Off Your Credit Card Debt
If paying your regular bills with a credit card seems to help you out of some cash jams, it is really creating a bigger problem for you down the road. To save money and lower your interest rate, get yourself a 0% transfer credit card and use the 12 to 21 month introductory period to pay off your credit card balance completely. If you are then able to live strictly within a budget, you could consider the advantages of using your credit card to pay your monthly bills.
Author: Jeff Gitlen
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