Should You Use Your Credit Card To Pay Monthly Bills?
Whether you should use your credit card to pay your monthly bills isn’t a decision to be taken lightly. Instead, it’s one that you should fully weigh the pros and cons of while taking into account your current financial situation.
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For example, if your bank account balance always comes up short when it’s time to pay your end-of-the-month bills, using a credit card to cover them could be the road to financial ruin. However, if you have plenty of money but are looking for ways to benefit your financial situation, a credit card could be a useful tool.
To help you decide if using a credit card to pay your monthly bills is the right move, here are the pros and cons — plus, advice on how you can make this bill-paying strategy work for you.
Pro: It Can Help Build Your Credit Score
“One of the main pros of putting monthly expenses on your credit card is it helps to increase or keep your credit score higher because it shows you are using credit wisely if balances are paid off monthly,” said Kevin Chancellor, a certified financial advisor and certified Social Security claiming strategist at JAG Financial.
Pro: It Can Give You a Fresh Perspective on Savings Goals
“By putting those monthly expenses on your credit card, it can help you separate your main household expenses from other discretionary spending helping you to find opportunities within your budget for other savings goals,” Chancellor said.
Read: Why It’s a Bad Move To Use the Same Credit Cards Indefinitely
Pro: It Can Help You Earn Cash Back and Rewards
There are some expenses you should never pay in cash, and in those situations, a credit card could come in handy. And if your credit card offers rewards, paying for large expenses, such as rent, might help you earn miles, points or cash back even faster.
“Credit cards may offer rewards and cash back for frequent usage — a benefit rarely offered by a bank account,” said David Frederick, the director of client success and advice at First Bank. “If individuals or businesses use credit cards to pay for recurring bills, they may quickly rack up frequent flier miles, exchangeable points or substantial cash-back rewards.
“Anyone considering using credit cards for rewards should carefully consider what bills the card may be used to pay, compare available credit cards that offer rewards, and pick the card that has the best overall rewards and the lowest overall fees.”
Con: It’s Easy To Lose Visibility of Your Spending
You might end up regretting it if you choose to put your monthly bills on autopay.
“You lose some visibility into what you’re spending when you use a credit card for all of your expenses,” said Joe Calvetti, CPA and founder of Still River Financial Planning. “I encourage people to at least scan their credit card statements each month — this gives you a sense of where your money is going and also allows you to catch any errors or fraudulent charges. You could also sign up for a free service like Mint or Personal Capital, which categorizes your expenses each month if you link your credit cards and allows you to get a good sense of the areas where you’re spending most.”
Con: You Can Rack Up Interest Charges If You Don’t Pay in Full
“It’s important to pay your full credit card bill monthly,” Calvetti advised. “The best approach is to set up an automatic payment of the balance due from your checking account. If you don’t pay the full balance, you start to accumulate interest. And in the same way compounding interest is a great tool to build your savings, it can wreak havoc on your financial picture if you’re allowing your debt to compound — especially at the interest rates on most credit cards.”
Is Using Your Credit Card To Pay Monthly Bills a Wise Choice?
If you have the self-discipline to set aside the cash you need each month to pay your credit card bill in full after expenses, you could benefit in more than one way. If not, it’s definitely not a good idea.
“The best setup for paying bills with a credit card is to have the card automatically pay the bills and have a bank account automatically pay the credit card bill every month,” Frederick said. “These automatic payments should rack up the rewards, consistently improve the cardholder’s credit score, and avoid the risk of carrying a balance on the card.”
If you fear you aren’t disciplined enough to make sure you save enough money to pay off your balance at the end of the month, Northstar’s director of financial planning, Christopher Pimpo, CFP(r) ChFC(r), recommends paying off your credit card bill much sooner.
“The reason I recommend paying more frequently is that you can better manage your checking balance relative to your credit card balance to help ensure you are not overspending,” Pimpo said. “You do not have to wait for your credit card statement to pay off your balance. By paying weekly or every few days, you can help prevent overspending and therefore avoid carrying a balance.”
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