Pay bills with a credit card?
June 1, 2006 2:00 PM   Subscribe

What are the potential downsides to using a credit card to pay my monthly bills, assuming I pay off the balance every month?

I currently pay all my bills straight out of my checking account (insurance, utilities, car payments, mortgage, etc.) and have recently thought about getting a credit card with some kind of rewards (thinking about airmiles) to use to make all of these payments. I won't be carrying a balance on the card, I just want to try and get something back from all my bills.

What are some things to be careful for if I decide to go this route. Are there hidden dangers to doing this that I'm not seeing?
posted by bajema to Work & Money (30 answers total) 2 users marked this as a favorite
There's no downside. Just pay off the balance in full every month and you'll be fine.
posted by BackwardsCity at 2:02 PM on June 1, 2006

Except good luck using those miles. My experience is that airmiles are becoming less and less valuable and harder and harder to use. I'd suggest shopping around for a good rewards program to do this.
posted by mattbucher at 2:07 PM on June 1, 2006

It's not exactly a "hidden danger" in that it's disclosed, but some of your billers -- utilities are notorious for this -- may charge a fee for processing a credit card payment.
posted by majick at 2:07 PM on June 1, 2006

Call it what you want (good or bad), but when you use a credit card, your credit report shows your high balance. So let's say you pay $2500/month in bills (including mortgage and car). Let's also assume you only have one credit card with a limit of $5000. According to your credit report, you're using 50% of your available credit at all times, which is viewed as bad.

This could be moot, of course, since you've already used your credit to qualify for your car and house loans. On the other hand, insurance companies use your credit report when issuing policies (which could hurt you in premiums). Additionally, if you need to adjust your mortgage, they'll take a look at your report.
posted by SeizeTheDay at 2:10 PM on June 1, 2006

I would have concerns that if a company kept your credit card on file they may make charges without your permission. This could be a problem if you try to cancel or downgrade service. The big companies can get away with things that would cause a small business to lose their merchant account.
posted by rolypolyman at 2:12 PM on June 1, 2006

my girlfriend works in a call center redeeming credit card points for airline tickets.

there are a LOT of restrictions on when, where, and how you can redeem your points for airmiles. most people don't realize this until they try to redeem their points, and this is why my girlfriend hates her job.

of course restrictions vary by what card/program you have, but i would recommend you go with a card that just gives you cash back or gift certificates. much less hassle.

discover gives cash back (though a lot of places don't accept it), and the bank of america platinum visa is another.
posted by Ziggy Zaga at 2:14 PM on June 1, 2006

I have a friend, one of those folks who buys everything with cash (including cars and houses) who keeps a Discover card just for this purpose. He makes a hundred bucks a year or so on Discover's cash back.

I myself got rid of most of my cards a few years ago and solely use an American Express card, which I use for absolutely everything. I have to pay it off, which enforces some discipline, and using Membership Rewards points has never been a problem for me (as long as you give the process enough lead-time).
posted by o2b at 2:19 PM on June 1, 2006

Ziggy: amen, thank you, exactly.
posted by mattbucher at 2:21 PM on June 1, 2006

(Brainstorming worst cases here): Say you have it set up with the utilities that they automatically charge your credit card when they issue their bills (most offer this, now). Say also that you have one mother of a February in which it is -45 degrees all month which keeps you inside so you order a pay-per-view movie every night. Your utility bills are WAY out of the ordinary and you go over your limit. That'd be bad.
posted by ChasFile at 2:22 PM on June 1, 2006

ChasFile: You'd still get the bill well before the payment was made. You'd have warning that you're about to go over-limit.

Thirding or fourthing the suggestion to just get a cash-back card.
posted by BackwardsCity at 2:25 PM on June 1, 2006

Citibank has a card with "Thank You" points that are redeemable for just about anything (via gift cards). If you always fly with one of the major air carriers, you could use the miles for tickets (sometimes difficult on popular routes, you'll get bumped first) or upgrades (easier, and in this travelers humble opinion, a better use of miles if you're traveling 3+ hours).
posted by Merdryn at 2:35 PM on June 1, 2006

One thing to look out for is that, if you decide to change credit cards years down the line or close one of you credit card accounts, you could get yourself in trouble if you forget to tell one of the places billing you to switch to your new account.
posted by driveler at 2:35 PM on June 1, 2006

I set my health insurance up for credit card billing, then my card number got fraudulated. Naturally, I got a new card, and when they billed the old card, it was declined. The catch is that the fine print was that they could charge me a $25 or something fee if the card was declined. Oops. May have been able to get it reversed, but I'm lazy.

Of course, I've gotten way more than that back with the cash back.

Um, another disadvantage is that sometimes you spend a little more so you get a bigger rebate. ;)
posted by trevyn at 2:35 PM on June 1, 2006

Use to find a decent card. I'm getting 5% cash back on my purchases (from grocery and gas) and 1% on everything else. I pay off my balance each month so life is good.
posted by blue_beetle at 2:36 PM on June 1, 2006

Oh, I missed the obvious there, that you're currently having them drawn directly from your checking account. In that case, it can be a hassle to switch a bunch of different accounts when your card info inevitably changes.
posted by trevyn at 2:37 PM on June 1, 2006

I just went through this, switching as many accounts as possible from being automatically withdrawn from a checking account to going on a cash back credit card. Some vendors simply don't accept credit cards. Hell, I'd pay my mortgage on a credit card for cash back if I could.

Most utility companies don't accept credit card payments or use a third party processor that charges a fee. Land line phone, cell phone, cable TV & internet, car insurance, homeowner's insurance, no problem.

trevyn, it was a hassle to switch from checking account to credit card (in some cases) but switching credit cards can be done on-line with a few mouse clicks in ninety seconds or so.

This all assumes that you will pay the CC bill in full each month. Just get a cash back card.
posted by fixedgear at 2:53 PM on June 1, 2006

If you are going to get an airline card, do some research and find out which airline goes to the one place you want to go, and get those miles.

For example, my mother in law does the same thing you are planning to do.
She's got a card with AA, which happens to be the only airline with a straight flight from her podunk airport to my podunk airport.
So, when she gets enough miles, she calls up AA and say "Ok, when can I fly with my miles"? They give her a choice of dates, she picks one, and voila, free trip to see her daughter. She does this once a year, and it works out great.

If she had any other airline card, it'd involve a car trip to another airport, or many transfers, etc.
So, if you go the airline miles way(which I think is better than cash back if you follow this plan), have a destination in mind before picking the card.
posted by madajb at 3:27 PM on June 1, 2006

Citibank will also let you use your check/debit card like a mc or visa which you can use to pay your bills. They have a program with that which will let you earn airline miles. There's a free (no fee) version which will earn you 1 airline mile for each 2 dollars spent, or a $60 per year version which lets you earn 1 airline mile for each 1 dollar spent.

It's well worth it, I use my debit card like a credit card to buy everything as well as pay my bills and I've already earned a free round trip to Europe with some miles left over to spare. This program is the reason I switched to their bank actually and I've been very pleased with it.
posted by RoseovSharon at 3:31 PM on June 1, 2006

If you have a dispute about a bill, it's much harder to get it rectified, because you have already paid the bill before you ever saw it. It's much easier to withhold a payment that you don't agree with than to get someone at the receiving end to agree with your dispute and refund your money.
posted by ikkyu2 at 3:58 PM on June 1, 2006

Incidentally, this very much includes the case where you believe the service is terminated: maybe, for example, because it's a utility bill and you moved to a different state a year ago, but they keep charging you anyway. It's very easy to set this up so companies have access to your credit; it's next to impossible to get their grubby faces out of the trough if they want to keep drinking there.

I'm "once bitten, twice shy" on this one.
posted by ikkyu2 at 4:00 PM on June 1, 2006

If a bill is variable (eg electricity), an automatic deduction of the full amount from your card may cause you to become lazy in checking the reasonableness of the bill. When you have to manually write a cheque or pay the card (eg by phone / internet) you are more likely to pay attention & notice if a bill seems over the top.
posted by UbuRoivas at 4:08 PM on June 1, 2006

I'll second ikkyu2 on difficulties stopping companies from taking money out of your account. I used to work in a credit card centre for a bank & surprisingly often people would assume they could stop payments just by cancelling their card & getting a new one. Not so. The withdrawals just flow on to the new account.

Typically, though, the companies are actually entitled to continue with the withdrawals, as the customers were under a contractual obligation to pay; I am not suggesting that the companies were necessarily behaving dishonestly. Nevertheless, if you want to get out of an arrangement with a company, it is much easier to withhold a cheque than to get your card details out of their system.
posted by UbuRoivas at 4:14 PM on June 1, 2006

Seconding what StD said:

According to your credit report, you're using 50% of your available credit at all times, which is viewed as bad.

In short, you may look like you're in a debt situation that you're not really in. Credit reports don't typically do a good job of showing "this person pays 100% of their balance every month".

This could be moot, of course, since you've already used your credit to qualify for your car and house loans. On the other hand, insurance companies use your credit report when issuing policies (which could hurt you in premiums). Additionally, if you need to adjust your mortgage, they'll take a look at your report.

Indeed. Other credit card companies will probably love you. Mortgage lenders might want you to provide proof that the "debts" on the report have been paid off, bit of a hassle, particularly since the "debts" will keep reappearing. It might make a difference in the size or terms of a mortgage that you would qualify for. In this situation, you could just stop using the cards in this way for a couple of months, then start again once you've signed the mortgage papers.
posted by gimonca at 5:01 PM on June 1, 2006

Air miles are silly. Their value can change in the form of some undecipherable legal notice in your mailing. I get 1% cash back on my CC. No funnybusiness there.
posted by umlaut at 6:33 PM on June 1, 2006

Just don't ever use your credit card's "convenience checks" as they often charge a percentage fee of anything you pay with them. Otherwise paying bills with a CC is not a bad idea, especially if you can earn cash back for doing so, and you never carry a balance. Just set yourself a reminder to pay your card on time!
posted by scarabic at 8:55 PM on June 1, 2006

My dad saved like $1500 on a cruise for our family by putting my sister's college tuition on some credit card associated with NCL cruise lines. Just another idea.
posted by knave at 1:14 AM on June 2, 2006

Carrying credit card debt also is not a big deal as far as your score goes. For a few years I was juggling about $7000 in CC debt and I had no problem qualifying for more house than I could honestly afford.
posted by knave at 1:15 AM on June 2, 2006

In short, you may look like you're in a debt situation that you're not really in. Credit reports don't typically do a good job of showing "this person pays 100% of their balance every month".

Unless you pay off as much as of your balance BEFORE the end of the billing period. That's where they take the snapshot for your credit report. I pay my credit card online right after payday, so I'm usually paid up before the billing period has even ended.
posted by ThePinkSuperhero at 6:16 AM on June 2, 2006 [1 favorite]

As far as getting something back on rewards cards goes, people have already mentioned several options. One thing to keep in mind with frequent flyer miles is that there's a difference between cards that give you miles themselves and the cards that give you points for airline tickets (these cards often advertise themselves as being good on any airline). Free frequent flyer miles has a very thorough breakdown of rewards cards (it's probably been mentioned on mefi before). Cards that give you real airline miles usually have annual fees, though you can often get the first year for free. You can check out the offers and decide whether the miles would be more valuable to you than the cash you'd get from a cash back card.
posted by komilnefopa at 2:17 PM on June 2, 2006

i think you need to read this Credit Card Faqs. you will find an answer for any credit card questions you have on that site. it has hundreds of questions, so its really useful
posted by jimkim at 11:18 PM on December 11, 2006

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