Should I be paying bills with a credit card?

Looking for new ways to accumulate credit card points and rewards?

Paying your monthly bills seems like a great way to earn more rewards. But is it wise to pay your bills with credit cards?

Not all bills are created equal, so you’ll need to evaluate each to determine which ones make sense to pay with a credit card. But first, here’s a quick look at the pros and cons of paying bills with plastic.

Pros

• Accrue rewards or points
• Automatic payments that save time and help prevent late fees
• Convenience of no check writing
• Easier expense tracking with everything on one statement
• Can mean additional time to pay
• Can help meet credit card sign-up bonus requirement

Cons

• Possible fees
• Increased debt
• Additional interest if balance is not paid in full
• Credit utilization could go up, which could affect credit scores

Generally speaking, paying your monthly bills by credit card can be a good idea as long as you’re able to adhere to two rules.

1. Always pay your statement balance in full and on time each month.
2. Avoid putting bills on a credit card because you can’t afford to pay them with cash.

If you’re having trouble paying your bills, a credit card could buy you a little time. But routinely using your credit card to pay bills you can’t afford could end up costing you a lot in interest and making your situation worse. On the other hand, if you’re paying routine bills that are within your budget, using a credit card has benefits.

So which bills can you pay with a credit card? And which bills will charge an extra fee if you pay with a card? Let’s look at which types of bills make the most sense to pay by credit card.

• Mortgage
• Rent
• Car payment
• Car and home insurance
• Health insurance
• Taxes
• Cellphone, internet, cable
• Utilities
• Subscription services
• Student loans

Mortgage

As the highest monthly expense for most people, 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’re 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 2.9% 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.

Rent

If you’re renting instead of paying a mortgage, you might still have a hard time finding a landlord who will accept something other than a check or cash for your monthly rent payment.

If you’re lucky enough to rent from a company with more sophisticated bookkeeping, consider using your credit card to pay your rent, especially if there’s no fee for the convenience.

Even with landlords that accept only cash or checks, you could still use a service like Plastiq or look for a credit card that allows you to pay rent through its own portal. None of these alternatives comes without a price — like convenience charges, interest or fees — but you get to decide whether the benefits outweigh the rewards.

Car payment

Auto lenders, like mortgage lenders, aren’t likely to accept credit card payments. They, too, want to avoid the processing fees.

There’s a way to use a credit card to pay off your car loan, but it requires some serious financial discipline. If you find a credit card offer with a 0% introductory annual percentage rate for balance transfers, you may be able to transfer your car loan to the credit card. But before you jump on this idea, there are caveats.

This option only makes sense if you choose a card with a 0% introductory APR that applies to balance transfers. Also, you’ll need to pay off the balance before the rate goes up after the introductory period. Otherwise you’ll be paying interest on the remaining debt on the credit card, and the credit card will likely have a higher interest rate than the original auto loan.

There are other downsides. For example, you may not be able to transfer the entire car loan to a balance transfer card. And depending on the card, you may be charged a balance transfer fee. Also, there will likely be a negative impact on your credit as transferring a large balance will increase your credit utilization.

Given all the caveats, paying your car payment with a credit card isn’t generally the most practical option. You’ll have to consider the downsides and determine if it makes sense in your case.

Car and home insurance

It’s easy to set up credit card payments with most insurance companies, but do your homework to make sure you aren’t incurring any fees. Some insurers don’t charge a fee, while others are fee-free only if you pay the premium in full rather than installments.

So it can make sense to pay these bills with your credit card, but only if you can avoid fees.

Health insurance

If you’re self-employed, you must pay health insurance premiums with the insurance company — an expense that could potentially earn you credit card rewards.

But not all health insurance providers accept credit card payments. If your insurer still accepts cards, take advantage of the opportunity and sign up to pay your premiums by credit card.

If you’re covered under the Affordable Care Act, insurers don’t have to accept credit cards unless the applicable state requires it. So payment options may vary from state to state and among insurers.

Taxes

You can pay some taxes with a credit card, but you’ll generally have to pay a fee.

For example, you can pay income taxes with a credit card, but the IRS does charge a fee for that convenience. Several variables — such as amount owed and what type of federal taxes you want to pay — may also affect your decision.

Cellphone, internet, cable

Cellphone, cable and internet providers typically allow credit card payments. It’s easy to set these payments up, and many of these companies don’t charge a fee.

Utilities

Want to pay your electric, gas, water and trash removal bills with a credit card?

Many utility providers allow you to pay your monthly bill with a credit card, but you may have to pay a convenience fee.

And if you’re trying to maximize your rewards earning, the higher your utility bill is, the more advantageous it becomes to pay by credit card — especially with a flat convenience fee. But you’ll want to weigh your average bill and the fee against the rewards you might see on your card to see if it’ll be worth it.

Subscription services

Most subscription services, like 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.

Student loans

Depending on who lent the money, repayment by credit card may be possible for student loans.

If you’re using a card with cash back rewards, consider applying cash back you earn toward your student loan to pay it down sooner than scheduled.

Bottom line

If your finances are in good shape, paying some of your monthly bills with a credit card makes sense. But it’s still important to prioritize paying off your credit card statement balance each month.

With careful planning, you can pay many of your bills by credit card. You can earn rewards, achieve that sign-up bonus, and even get a little extra time to pay by putting monthly expenses on a credit card wherever it makes sense.