Want to pay your bills with a credit card?

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

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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 its costs.

Here’s everything you need to know before deciding whether to pay your bills on plastic.

How to pay your bills with a credit card

There are two main ways you can use your credit card to pay bills: autopay and one-time payments.

Autopay

Bills that are charged at a set time each week, month or year can usually be set up as an autopay from your credit card account. This could include your mortgage payments, insurance premiums, home utility services, gym membership, Internet and other subscriptions for entertainment services like Netflix.

What are the benefits of using autopay to pay bills?

  • Don’t need to think about it. Keeping track of multiple payments can be tedious and you can still miss a payment. Autopay takes the burden off your shoulders.
  • Avoid penalties. Credit card providers can be ruthless if you miss a payment on your balance. If you miss a payment, some providers may impose a penalty APR of up to 32%, remove your intro APR period and charge penalty fees. You can avoid this with autopay.
  • Choose how much you pay. Most credit card providers allow you to pay your full balance, make the minimum payment or pay a fixed amount each billing cycle.
  • Choose your payment date. Often you are the one who chooses when the automatic payment goes through. This way you can set up a date after you get your paycheck.

What are the downsides when using autopay to pay bills?

  • Autopay fees. Some service providers may charge a fee, but most prefer that you set up autopayment and have made this a fee-free mode of payment.
  • Declined payment. You could be charged fees twice – once by the service provider and once by your credit card provider.
  • Overdraft fees. The card provider might choose to honor the autopayment and may charge you an overdraft fee and default interest.
  • Interest charges. The autopayment will be subject to interest fees if you carry a balance or if there is no interest-free period on your card.
  • Cancelled subscriptions. If you cancel a subscription or wish to stop the autopayments, you’ll have to contact both your bank and service provider to ensure that you don’t get charged any fees.

How do you set up an autopay with your credit card?

Most providers let you set up autopay either through their mobile app or your online banking account. The process varies between providers, but here’s how you generally can do it:

  1. Find out if there is an autopay option through your service provider.
  2. Provide your chosen credit card account details.
  3. Confirm the details and authorize the autopay agreement.

One-time payments

One-time bill payments allow you to pay as you go and can be convenient for charges that vary in amounts or are less regular. You might choose to use your credit card to make a one-time payment on your tax bill or for paying off your car repairs in the same way you’d make a regular credit card payment.

In personOnline
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 benefits of using one-time payments to pay bills?

  • Avoid overdraft. You can wait and avoid overdraft on your account if you don’t have money at the moment.
  • Full control over your spending. For non-recurring charges, one-time payments can be ideal as you get full control when to pay.

What are the downsides when using one-time credit card payments to pay bills?

  • Card acceptance. Some businesses may limit the type of cards they accept, or they may prefer cash.
  • Cash advance transactions. Some bill payments may be treated as cash advances if the business you are trying to pay isn’t set up to accept credit card payments. Your card provider will process the payment as a cash advance and charge you the cash advance interest rate and a cash advance fee.
  • Credit card surcharges. Service providers may charge a small percentage fee of your bill for paying with your credit card.
  • Interest charges. If the business accepts credit card payments, the transaction will be typically treated as purchase. This means you can enjoy an interest-free period as per all purchase transactions.

Paying bills with autopay

Should I pay bills with my credit card?

Paying for bills with a credit card could be useful for several reasons. You can:

  • Earn rewards
  • Automate your payments
  • Meet your credit card’s signup bonus requirements
  • Easily track your expenses

However, you can’t make all payments directly with a credit card. If you want to pay your mortgage or school tuition with a card, you need a workaround. There are payment services that can help you pay with a card where otherwise isn’t accepted.

You want to maximize rewards

When it comes to the perks of paying your bills with a credit card, we find that it’s usually more about the rewards points than anything else. The restricting and limiting of points can vary significantly between credit cards, so refer to your credit card’s terms and conditions or contact your issuer before making a payment to earn rewards.

Is the purchase eligible for points?

Most of the time, the relevant clause pertains to “eligible transactions”, where they state whether or not such a transaction is eligible for earning rewards points. Note that this is not usually the case for other types of bills, such as subscriptions to the gym.

What are the credit cards that earn points for utility payments?

On the bright side, there are a few credit cards that do let you earn points on such payments. One option is:

This card earns 5% cash back on home utilities and one more category you choose on up to $2,000 in combined purchases each quarter. But you have to activate your categories before the quarter starts or five days before it ends.

Case study: Earning credit card rewards while making bill payments

paying-with-credit-card

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

  • Entertainment streaming service: $29.99 per month ($359.88 per year)
  • Gym membership: $80 per month ($960 per year)
  • Health insurance: $400 per month ($4,800 per year)
  • Telecommunications: $200 per month ($2,400 per year)
  • Grocery stores: $500 per month ($6,000 per year)
  • Electricity: $500 per quarter ($2,000 per year)

She decides to get the U.S. Bank Cash+™ Visa Signature® Card, which earns 5% cash back per dollar spent on two categories you choose on up to $2,000 in combined purchases each quarter, including utilities and gym subscriptions, and you earn 2% cash back on purchases made either at gas stations or grocery stores. After activating the categories, Annie sets up all her above payments as an autopayment from this account.

Over a year, Annie earns:

  • Entertainment streaming service: $3.59 cash back
  • Gym membership: $48 cash back
  • Health insurance: $48 cash back
  • Telecommunications: $120 cash back
  • Grocery stores: $120 cash back
  • Electricity: $100 cash back

Total: $439.59 cash back per year

Annie can redeem her cash back as a statement credit or a deposit to her U.S. Bank savings, checking or money market account.

You pay off your credit card in full each month

If you decide to pay your bills with your credit card, automating your payments on time can show your card provider you’re a responsible cardholder. Most providers report your card activity to the credit bureaus, which helps build your credit.

You want to simplify payments

If you’re too busy to manage all your credit card payments, using autopay can simplify the process. But even if the bill pays itself you should make it a habit of checking your credit card statement at least once a month, to make sure you’re not paying for fraudulent charges.

To make sure it’s the right option for you, you should do your research and weigh up the costs and benefits before deciding if this is your best option.

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Compare rewards credit cards

Updated October 16th, 2019
Name Product Welcome offer Rewards Annual fee Filter values
20,000 miles after spending $1,000 in the first 3 months
1.25x miles on all purchases and 10x miles at hotels.com/venture
$0
Earn 20,000 bonus miles once you spend $1,000 on purchases within the first 3 months from account opening.
N/A
1x points on all purchases with 2% point value when you redeem for airfare and 1.5% for cash back
$495
Receive an annual $100 air travel credit toward flight-related purchases including airline tickets, baggage fees, upgrades and more.
75,000 points after spending $1,000 in the first 3 months
7x points on Hilton Honors purchases, 5x at US restaurants, US supermarkets and US gas stations, 3x on all other purchases
$0
Earn 75,000 Hilton Honors Bonus Points after you spend $1,000 in purchases on the card within your first 3 months of card membership. Rates & fees
$150 cash back after spending $500 in the first 3 months
1.5% cash back on all purchases
$0
Earn unlimited 1.5% cash back on every purchase, every day.
$150 after spending $500 in the first 90 days
5% on up to $2,000 each activated quarter on two categories combined (1% after), 2% on one everyday category and 1% on all other purchases
$0
When you spend $500 on your card within the first 90 days, you’ll receive a $150 cash back bonus. Rates & Fees

Compare up to 4 providers

Bottom line

While autopayments can be a cost-effective and convenient way to schedule and manage cash flow, be sure to check for hidden and potential fees or for fraudulent charges that may bite you later on. Using your credit card to pay for regular expenses can also be an efficient way to maximize rewards earnings and build your credit.

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