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Paying your bills with a credit card

Weigh up the pros and cons of using a credit card for bill payments.

There are plenty of reasons to consider using your credit card for bills, including convenience, easy cash flow management, and the ability to earn points and rewards. However, it doesn’t come without costs. Here’s everything you need to know before deciding whether to pay your bills on your plastic.

How to pay your bills with a credit card

Firstly, there are 2 main ways you can use your credit card to pay bills: direct debits and one-off payments. These are outlined in detail below.

1. Direct debits

Bills that you pay regularly can usually be set up as direct debits from your credit card account. These payments may include mortgage payments, insurance premiums, home utility services, gym membership, Internet and subscriptions for entertainment services like Netflix or Sky. Often, all you need to do is call your service provider.

How do you set up a direct debit with your credit card?

The specific details vary depending on the financial institution, but the steps usually include:

  1. Request a direct debit payment option through your service provider.
  2. Provide your chosen credit card account details (i.e. credit card number, expiry date and 3-digit card verification code).
  3. Confirm the details and authorise the direct debit agreement.

What are the key factors to consider when using a direct debit to pay bills?

  • Direct debit fees. Some service providers may charge a fee for a direct debit from a credit card. This could be 1–3% of the total transaction cost, although this charge is becoming less common. Most service providers prefer you to set up a direct debit payment with them, and as such, have made this a fee-free mode of payment as an alternative to cheques or mail orders, etc.
  • Declined payment/dishonour fees. If a payment is declined, for example, because your card is over its credit limit, you could be charged a dishonour fee twice – once by the service provider and once by your credit card provider.
  • Overdraft fees. In some cases, the card provider may choose to honour the direct debit even when your account is over its credit limit. Instead, it charges you an overdraft fee and default interest.
  • Interest charges. As with any transaction, a direct debit payment is subject to interest fees if you carry a balance or there is no interest-free period on your card. This is something to be conscious of when managing your credit card repayments.
  • Cancelled subscriptions. If you cancel a direct debit subscription, you have to make sure no more charges are taken from your card. If you wish to stop the direct debit payments, you need to contact your bank and service provider to ensure there is no misunderstanding and you aren’t charged any dishonour fees.

2. One-off payments

Another option is to use your credit card for one-off bill payments. This allows you to pay as you go and is convenient for charges that vary in amounts or are infrequent. For example, you might use your credit card to make a one-off payment on your tax bill or to pay for your car repairs. Usually, you can make one-off bill payments in the same way you make a regular credit card payment:

Swipe, insert or tap your card and follow the prompts to complete the transaction.Choose “Card” as your payment option and enter your details.

What are the key factors to consider when using one-off credit card payments to pay bills?

  • Card acceptance. Not all companies accept credit card payments, and some may limit the type of cards they accept. As a result, some payment options may not be available with a credit card, such as POLi. This depends on your card and how the payment service is set up.
  • Cash advance transactions. Some bill payments are treated as cash advances based on how they are processed – for example, if your POLi biller isn’t set up to accept credit card payments, but you pay with your credit card anyway. Your card provider processes the payment as a cash advance and charges you the cash advance interest rate (and a cash advance fee). You won’t earn points when this happens, either. When in doubt, you should always clarify with your biller whether they accept credit card payments.
  • Credit card surcharges. Service providers may charge a small percentage fee of your bill for paying with a credit card, so this is something to pay attention to as well.
  • Interest charges. If your biller accepts credit card payments, the transaction is usually treated as a purchase on your card. This means you can enjoy interest-free days as per all purchase transactions. However, as explained above, the transaction may sometimes be processed as a cash advance, which immediately attracts interest fees.

Should you pay your bills with a credit card?

Using a credit card to pay your bills is okay if you pay off your card in full each month, as this means you are not charged interest. However, if you only make the minimum repayment due on your statement, it takes a lot longer to pay off your credit card debt, as it attracts interest

When paying your bills, you could benefit from earning rewards if, for example, you have a credit card that earns Airpoints Dollars. Remember, rewards are tempting but ensure the higher annual fees and interest rates don’t outweigh the benefits.

Earning rewards for paying your bills with a credit card

When it comes to the perks of paying your bills with a credit card, it’s usually more about the rewards points than anything else. It is essential to understand that many rewards credit cards restrict or don’t award points for specific types of bill payments, including:

  • Inland Revenue payments
  • Some utility payments

The terms and conditions vary significantly between credit cards, so refer to your credit card’s Product Disclosure Statement or contact your issuer before making a payment to earn rewards. Frequently, the relevant clause pertains to “eligible transactions”, where they state whether or not a transaction is eligible to earn rewards points. Note, this is not usually the case for other types of bills, such as subscriptions to the gym.

Example: Earning credit card rewards while making bill payments

Let's look at Annie's monthly expenses and how she can earn rewards for her regular bill payments:

  • Entertainment streaming service: $47.00 per month ($564.00 per year)
  • Gym membership: $80 per month ($960 per year)
  • Health insurance: $400 per month ($4,800 per year)
  • Home telecommunications and Internet: $200 per month ($2,400 per year)
  • Electricity: $500 per quarter ($2,000 per year)
  • Mobile phone: $100 per month ($1,200 per year)

She decides to get the ANZ Airpoints Visa card, which earns 1 Airpoints Dollar per $130 spent on eligible purchases. After checking and discovering there are no direct debit fees involved with Internet banking, Annie sets up her payments as direct debits from this account.

Over a year, Annie earns:

  • Entertainment streaming service: 4 Airpoints Dollars
  • Gym membership: 7 Airpoints Dollars
  • Health insurance: 40 Airpoints Dollars
  • Home telecommunications and Internet: 18 Airpoints Dollars
  • Electricity: 15 Airpoints Dollars
  • Mobile phone: 9 Airpoints Dollars

Total: 93 Airpoints Dollars per year

Based on current Airpoints Store pricing, Annie can exchange:

  • 80 Airpoints Dollars for an NZ Life and Leisure Insiders Guide to NZ Collectors Annual 2021
  • 90 Airpoints Dollars for Marley Little Bird In-Ear Headphones
  • 80 Airpoints Dollars for a bottle of Grove Mill Pinot Gris 750ml

* This is a fictional, but realistic, example.

While direct debits are a cost-effective and convenient way to schedule and manage cash flow, be sure to check for hidden and potential fees that may bite you later. Using your credit card to pay for regular expenses may be an efficient way to maximise rewards earnings. To make sure it’s the right choice for you, do your research and weigh up the cost and benefits before deciding if it is your best option.

Looking for a credit card? Compare your options

1 - 5 of 35
Name Product Purchase Rate Annual fee Balance Transfer Rate
American Express Airpoints Platinum Card
19.95% p.a.
Receive 500 bonus Airpoints Dollars when you apply online by 08 August 2022, are approved and spend a minimum of $1,500 on your new card within the first 3 months of membership.This offer is available to new Card Members only. T&Cs apply. You will also earn 1 Airpoints Dollar for every $59 you spend on your card.
American Express Airpoints Card
0% for 6 months (changes to 19.95% p.a.)
Be rewarded with 50 bonus Airpoints Dollars. Simply apply, be approved and spend $750 on your new Card within the first 3 months of membership. This offer is available to new Card Members only.
American Express Gold Rewards Card
19.95% p.a.
Receive $200 credit when you apply online, are approved and spend $1,500 on your card within the first 3 months of membership. Offer is available to new card members only. T&Cs apply. You will also earn 2 Membership Rewards points for every $1 spent on eligible purchases.
American Express Platinum Card
Receive 200,000 bonus Membership Rewards points when you apply online by 29 August 2022, are approved and spend $2,000 on your new card within the first 3 months. This offer is available to new Card Members only. T&Cs apply.
The Co-operative Bank Fair Rate Credit Card
12.95% p.a.
0% p.a. for 6 months
0% p.a. on balance transfers for 6 months, plus benefit from a low rate of 12.95% p.a. on both purchases and cash advances.

Compare up to 4 providers

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