When does it make sense to pay a bill with a credit or debit card?
Credit and debit cards offer incredible convenience; but, is it a smart idea to pay monthly bills with them?
Choosing to pay a bill with a card can have a significant impact on your general financial wellness — for better or for worse. It’s important to consider a few variables of before going ahead with the decision.
- Learn more about credit cards at Arsenal Credit Union
- Learn more about debit cards at Arsenal Credit Union
What are the advantages of paying bills with credit or debit cards?
Automate monthly payments so they’re always on time
Setting up automatic payments for monthly bills through a credit card or debit card will help ensure payments are always on time.
Build credit with a consistent monthly payment
Using a credit card for a monthly bill is a great way to amp up a credit score without running the risk of overspending. Just be sure to pay the bill in full and on time every time.
Earn rewards for money that needs to be spent anyway
Using a credit card that offers rewards for a bill that needs to be paid anyway will help to pile on those rewards points without overspending. At Arsenal, you earn rewards points for both debit card and credit card purchases.
Enjoy consumer protection, like zero or minimal fraud liability, guaranteed returns and more
Paying with plastic offers the consumer the advantages of purchase protection, zero or minimal liability in case of fraud, guaranteed returns and more.
Pay your bills quickly without the hassle of writing out checks and using snail mail
With a credit or debit card, paying a bill only takes a few clicks or phone prompts.
Budget easily with payments that can always be tracked
Paying with a credit or debit card makes for easy tracking of monthly spending.
Payments post promptly
Bill payments made via credit or debit card will generally post within one or two business days. Contrast that with a check that needs to be mailed out, delivered to the correct party and then deposited and cleared until the payment is finally processed.
What are the disadvantages of paying bills with credit or debit cards?
There may be fees for paying the bill with a debit or credit card
Pay close attention to the payment options on every bill; some service providers charge a processing fee for paying with a debit or credit card.
For consumers who are already carrying high debt, it can make a difficult financial situation worse. Similarly, it isn’t responsible to set up an automatic monthly payment through a debit card that is linked to an account that may not have enough money to cover the charge
For consumers who are already carrying a sizable amount of debt, it may not be the best idea to charge a monthly bill to a credit card. Similarly, it isn’t responsible to set up an automatic monthly payment through a debit card that is linked to an account that may not have enough money to cover the charge each month.
Credit utilization may cross the threshold to an undesirable rate
One of the key components of an excellent credit score is a low credit utilization rate. For consumers with a minimal amount of available credit, charging too many bills to a credit card can cause their score to plunge.
Interest may accrue for consumers who cannot pay their entire credit card bill each month
Consumers who cannot pay their entire credit card bill each month would be saddled with more accrued interest than they can afford if they choose to pay their monthly bills with a credit card.
Which bills can I pay off with a credit or debit card?
You will likely not be able to pay the following monthly bills with a credit or debit card:
- Car payments
These monthly bills can usually be paid with a credit card, but you may need to pay a fee to do so:
- Car insurance
- Home insurance
- Health insurance
The following monthly bills usually allow you to pay with a credit card or debit card without a fee:
- Subscription services
- Phone bills
- Utility bills
- Internet providers
- Cable providers
Before deciding whether to pay a specific bill with a credit or debit card, it’s best to check with your provider to find out if this is a viable option and if there will be a fee attached for paying with plastic.