Can You Pay Bills with a Credit Card?

People generally use credit cards to pay for new purchases. What you may not know is that you can also use a credit card to pay your bills.

In fact, when done correctly there are advantages to paying bills with a credit card. This can include many of the routine bills you pay month after month, such as rent, utility bills, subscriptions and phone plans. 

This article will discuss paying bills with a credit card. It will list some of the types of bills you can pay with a credit card. It will also discuss the pros and cons of using a credit card to pay your bills. 

Most importantly, this article will include tips on how to pay bills with a credit card so it works to your maximum advantage.

Topics covered include: 

• What bills can you pay with a credit card?
• Reasons to pay bills with a credit card
• Reasons not to pay bills with a credit card
• Pros and cons of using a credit card for different types of bills
• Should you be using a credit card to pay bills?

What Bills Can You Pay with a Credit Card?

If you’re like most people, you’re most accustomed to using a credit card for two types of transactions:

• Point-of-sale transactions, which involve paying for something at the physical location where you’re making the purchase. 
• Online transactions, where you place an order online and use a credit card to pay for that order.

To get the most out of your credit card, you might also consider a third type of use for your credit card. That third type of use is bill paying.

Right now, you’re probably paying those bills from a checking account. Even if you’re not actually writing checks, you’re directing payment from your checking account to the company you owe money to. 

This is very straightforward, but under certain circumstances it may represent a missed opportunity. Those opportunities will be discussed in a later section on reasons to pay bills with a credit card. First though, take a look at some of the bills you could be paying with your credit card, and some of your options for making those payments.

Which bills can you pay with a credit card?

Think of all those routine bills that you get each month. You could pay many of them with a credit card.

Whether you can pay a bill with a credit card depends on the billing practices of each company. If a company allows payment by credit cards, they will generally give instructions on how to do it somewhere on their billing statement.

Type of companies that frequently allow payment by credit card include:

• Utilities, such as gas, electric and water
• Cable, internet and streaming subscriptions
• Cellular and landline telephone services
• Home, auto and life insurance
• State and local taxes
• Medical bills

On the other hand, bills you generally can’t pay by credit card include:

• Mortgages
• Auto loans
• Student loans

The way payments are handled is changing rapidly these days. That means more and more service providers are allowing credit card payments. There’s no harm in asking any service provider if you can pay their bill with a credit card.

Autopay or manual transaction?

When setting up a bill to pay online, one choice you’ll have is whether to use autopay or a manual transaction:

• Autopay means that the amount billed will be charged to your credit card account as soon as the bill is received, without your separate authorization each time.
• A manual transaction is one you have to authorize separately to pay each bill.

Autopay may be most efficient for monthly bills that are for the same amount of money every time. Since these are routine, you know what amount to expect so there’s no reason for you to have to authorize each payment.

In contrast, for bills that are usage-based or otherwise vary from month to month, you may prefer to authorize each one manually. That way, you’ll have a chance to review each bill to make sure there are no surprises before payment is charged to your account. 

Reasons to Pay Bills with a Credit Card

The following are some of the benefits of paying bills by credit card:

• Rewards. If you have a credit card that pays rewards, the more you use the card the more rewards you earn. Using the card to pay routine monthly bills can really ramp up your usage and qualify you for more rewards. In particular, cash back rewards can come in handy because those rewards can go towards helping pay your bills.
• Flexibility. Paying by credit card can give you the flexibility to pay your bills at any time. You may prefer this to paying from your checking account. That may require you to wait for your next paycheck to come in or otherwise make sure you have a sufficient account balance to pay the bill. 
• Add to payment history. A regular record of on-time payments helps you build a strong credit history. However, most of the monthly bills you pay are probably not reported to credit bureaus. Credit card payments do count towards your credit score. So, paying your monthly bills by credit card can ensure you use your card every month and thus maintain a regular payment history.

Reasons Not to Pay Bills with a Credit Card

While there are advantages to paying bills with your credit card, there are also some drawbacks you should know about:

• Potential interest charges. If you don’t pay your credit card balance off in full every month, you will be assessed interest charges. These could add substantially to the cost of your monthly bills.
• Service charges. Some companies add an extra charge when you pay your bills by credit card. It’s sometimes called a “convenience charge,” but you may decide the convenience isn’t worth the extra cost. 
• High credit utilization. Using a high percentage of your credit limit is a negative factor in credit scores. If you pay a lot of bills by credit card, it will keep your credit utilization high. Even if you pay your balance off in full every month, paying bills by credit card will raise your credit utilization for part of the month. That might be enough to hurt your credit score. 

Pros and Cons of Using a Credit Card for Different Types of Bills

Whether or not it makes sense to pay a bill by credit card can depend on the type of bill. The following is a rundown of the pros and cons of paying various bill types by credit card:

• Rent. This is more likely to be an option if you rent through a large property management company than through a small landlord. The large amounts that rent payments represent may make them a poor choice to handle with a credit card. If you incur interest or service charges, these might be especially expensive because they are assessed as a percentage of the charge. Also, those large payments could hurt your credit score by keeping your credit utilization high.
• Mortgage. Loan payments can’t typically be made by credit card. Even if your loan servicer allows it, the large size of these payments could mean you’d run into the same drawbacks described above for rent payments.
• Utility. These are usually routine payments for moderate amounts. That can make them ideal for payment by credit card, as long as there isn’t a heavy service charge attached. 
• Insurance. Paying insurance by credit card might make the most sense if you are on a monthly payment plan. That will keep the amounts moderate and you’ll benefit from the convenience of not having to make each of those payments manually. Again though, watch out for any service charge involved for credit card payments. 
• Phone plans. These are like utility charges - fairly routine payments for moderate amounts. That makes them good candidates for payment by credit card if the service charge isn’t too steep. 
• Subscriptions. These are especially good candidates for payment by credit card because they are usually a fixed monthly amount. As always though, watch out for that service charge. 
• Taxes. If it’s a small bill, the convenience of paying by credit card might be worth it. For larger tax bills though, there’s a significant potential added cost of interest and/or service charges. Also, be aware of the impact that a large tax bill could have on your credit utilization. This could drag down your credit score.
• Medical bills. Medical bills can come up unexpectedly so paying by credit card may be your only option in a pinch. As with any large bill though, the added cost of interest and service charges could be significant. Also, the usage could impact your credit score.

Should You Be Using a Credit Card to Pay Bills?

Here are three guidelines for determining whether you should pay a bill by credit card:

1. Can you pay your credit card balance off in full each month? Paying your balance in full each month will help you avoid interest charges. It will also reduce the impact on credit utilization. 
2. Is there a service charge for paying by credit card? If so, you need to figure out whether the amount of that charge is worth the benefits of paying by credit card. 
3. Does your credit card pay rewards? If you earn rewards, especially cash back rewards, it adds an incentive to paying by credit card. This is especially true if the amount of the reward exceeds any service charge involved.

There is no one-size-fits-all answer to whether it makes sense to pay bills by credit card. It’s something you should decide on a case-by-case basis. The above guidelines can help you make those decisions.