When you should (and shouldn't) pay bills with your credit card
Whether you’re trying to reach the minimum spending requirement for a sign-up bonus or working on racking up miles for your next award trip, you can get a lot of value from paying for everyday expenses with a credit card. No points and miles enthusiast wants to leave potential rewards or cash back on the table.
Of course, following the first principle of credit card management is critical — paying your balance on time and in full every month. As long as you follow this rule, you can avoid interest charges, protect your credit score, and perhaps even earn credit card rewards along the way.
There can be huge benefits to paying many bills and other expenses with rewards credit cards. That being said, even with responsible credit card usage there may be some transactions you won't want to charge.
Here’s how to decide which bills to pay with a credit card and when you’ll probably want to leave those little pieces of plastic or metal in your wallet.
Related: TPG’s 10 commandments of credit cards
How to decide whether to pay a bill with a credit card
Can you pay off the full balance?
You could incur expensive interest charges if you charge more on a credit card than you can afford to pay off in a given billing cycle. The average annual percentage rate (APR) on interest-assessing credit cards was over 20% in the first quarter of 2023, according to the Federal Reserve. So, it’s important to pay attention to your credit card’s APR (especially if you have an outstanding balance).
Even if you take advantage of a 0% APR offer, there are some downsides to revolving outstanding credit card balances from month to month. Credit card debt can cost you money in hidden ways, including the fact that a higher credit card utilization rate could harm your credit score. In most cases, it’s best to only use your credit card for bills and purchases you know you can pay off by the time the due date on your next statement arrives.
Are there fees for using your credit card?
Another detail to consider before you type in your credit card information to pay a bill is whether the creditor or merchant will charge you a surcharge. Thanks to bank interchange fees, it’s not uncommon for landlords, utility companies, and other service providers and merchants to pass on those costs to customers who pay using a credit card.
In some cases, you may be able to find alternative solutions to help you avoid surcharges. Using the Bilt Mastercard® to pay rent with a credit card without fees is one example. (see rates and fees). And in the case of merchants and service providers, you could consider taking your business to a competitor that doesn’t charge extra fees for using your credit card. Yet at other times, there’s no getting around these costs unless you use another payment method.
If a creditor or merchant imposes a surcharge on credit card payments, you’ll need to do the math to figure out if the rewards you could earn are worth the cost of the fees you’ll incur.
TPG’s monthly points and miles valulations chart can help you crunch the numbers. In general, some points are worth up to 2 cents each. Yet keep in mind that if you’re working to meet the minimum spending requirement for a sign-up bonus or could earn extra points, miles, or cash back from a bonus category, your calculations might be different.
Is fraud or purchase protection important for this transaction?
One reason it’s better to pay with a credit card whenever possible is that debit cards, cash, and old-school checks don’t offer you the same types of protections as credit cards. For example, your fraud liability may increase if a thief uses your debit card for unauthorized purchases. And thanks to the Fair Credit Billing Act (FCBA), you can dispute credit card charges in certain situations such as incorrect billing amounts, undelivered goods and services, and more.
Some credit cards offer purchase protection that can reimburse you for repairing or replacing items you purchase (assuming you paid with your credit card). And you can even find many credit cards that offer extended warranty benefits that can protect you if an item you purchase breaks after the manufacturer’s warranty expires.
There are some expenses you probably shouldn’t put on your credit card. And if you can’t pay off your full credit card balance each month to avoid high-cost interest fees, you might want to pause credit card charges altogether until you pay down your credit card debt and make a plan to avoid future overspending.
Yet when you use credit cards responsibly, it makes sense to pay with a credit card anytime you can pay the balance in full and avoid surcharges. Even with surcharges, if the benefits and rewards you earn from using your credit card are enough to offset those fees, you might want to pay with your credit card anyway.
See Bilt Mastercard rates and fees here.
See Bilt Mastercard rewards and benefits here.
Additional reporting by Stella Shon.