Automatic payment can be a great way to manage your bills stress-free—the “set it and forget it” mindset can put you at ease. You’ve probably considered paying bills automatically from your checking account, but there’s one secret weapon you may not have used: your credit card.
A proactive (and rewarding!) solution
Using your credit card to get your bill payment system in order can come with a host of benefits. You can:
- Earn rewards. If your credit card lets you build up points, miles or cash, you can earn these rewards faster by swiping your credit card for your bills. If your current card does not offer a rewards program, consider switching to one that does.
- Reduce your low-balance risk. Having bill payments linked to your credit card eliminates the risk of a low checking account balance causing problems with insufficient funds when your bills are due.
- Keep your credit score in check. You can avoid the credit-damaging effects of late or missed payments by using your credit card for many of your monthly bills. Plus, using your credit card monthly and routinely paying it off in full may improve your credit score by demonstrating responsible credit use.
Consider the following
Your credit card can be a useful tool for managing your finances, but you’ll want to think carefully before diving in. Ask yourself the following questions:
- Can you pay your credit card balance on time (and in full) each month? If the answer is no, you shouldn’t add more to your balance. First, work on managing your payments.
- Are you putting your bills on credit cards because you can’t afford to pay them? If you’re using your paycheck to splurge on a new pair of boots and resorting to your credit card for your cell phone bill, you’ll work yourself into a hole—quickly.
- Is there a convenience fee associated with paying by credit card?The fees are usually small, but they can add up month-over-month.
Keep in mind: You may not be able to use your credit card to pay for every type of bill payment.
- Good to go: Your cell phone bill, streaming services, gym membership and other monthly subscriptions are all good candidates for using credit card payments.
- Sometimes acceptable: You can typically set up credit card payments with your insurance and utilities companies, but you’ll want to watch out for convenience fees.
- Typically not recommended: Mortgage or rent payments are likely off limits. Few lenders or landlords accept credit card payments, and those who do may charge a fee.
Your four-step plan to getting started
Follow these four steps to start paying bills from your credit card:
- Take stock of your situation. Consult your budget. (Don’t have one? Get started now!) Look at how many monthly bills you pay and which ones you can pay for with a credit card. Calculate how much you typically owe for each bill and how much you’ll be spending each month.
- Choose your card. Pick one card—two at the most—to use for your bills. You might decide based on the credit limit, rewards programs or how long you've had the account. Remember that you can’t pay one credit card bill from another, so your credit card payments themselves will need to come from your checking account.
- Set up automatic bill payments from your credit card. Most billers’ websites provide the option for online bill payment. Check to see if there is a convenience fee, and if there is, add it to your budget.
- Set up automatic payments from your checking account to your credit card. Next, remember your credit card payment itself! Set up an auto-payment from your checking account. Keep the funds for your credit card payment in your checking account until your payment is due, allowing you to pay the balance in full and on time.