There are two types of people who use reward credit cards. Most fall into the category of people who just happen to have a reward credit card, and are pleasantly surprised each month when they’ve earned a little cash back. But others have recognized the amazing potential of these cards, and strategically plan how to earn as much rewards as possible.
If you want to be more like them, you’ll want to understand which credit cards are best for your needs.
New cards are constantly being introduced that offer higher levels of rewards for your purchases. But another way to increase the rewards you earn is by paying bills with rewards credit cards.
Keep reading to learn how to do just that (and why sometimes it might not be the best idea).
Finding bills that you can pay with your credit card
With most bills that you receive in the mail, you’ll also receive an envelope for you to mail in a check, and an account number if you wish to make electronic payments. But what you may not see is the option to pay by credit card. To determine if you can pay a bill via credit card, you can look at the biller’s website or call the company.
For example, you may be able to pay medical bills, insurance premiums, and some utilities with your credit card. By themselves, these bills might not seem like a lot of money, but there can be substantial value in paying them each month with your rewards credit card.
However, keep in mind that paying bills with your credit will be costly to the biller, and they might not make this option available. For instance, my health insurance provider will let me pay my premiums with a credit card, but I have to call them each month to arrange payment. On the other hand, my mobile phone provider is happy to keep my credit card on file and charge it every month.
Which credit cards should you use to pay bills?
When you’re trying to optimize credit card rewards, you’ll need to figure out which cards offer the most bang for your buck.
The Chase Freedom Unlimited card can’t steer you wrong. You can earn 1.5% cash back on all purchases, plus a $150 cash sign-on bonus when you spend $500 within the first three months.
Check out these other cash back cards that’ll give you plenty of rewards.
When you shouldn’t pay bills with a rewards card
As valuable as it can be to use a rewards card to pay your bills, there are times when it’s just not a good idea. For example, credit card rewards are only worth it when you can avoid all interest charges by paying your balance in full, every month. If not, then the cost of interest charges will exceed the value of any rewards you earn.
Furthermore, charging your bills to your credit card can increase the amount of debt you have, which can hurt your credit score. If you need to carry a balance, even occasionally, then you should avoid paying your bills with a credit card and stick to other methods of payment.
Another time you should avoid using your credit card is when the biller ads a fee. These fees can be called transaction fees, convenience fees, or processing fees, but the effect is always the same. These fees will almost always be two to three percent of the amount paid, which will typically be larger than the value of any rewards you receive.
For example, there are some services that offer to pay your monthly rent or mortgage payments with your credit card. However, this is a classic case of a company that will charge you extra in transaction fees.
You can easily earn rewards by paying bills with rewards credit cards, so you’ll want to use them to pay as many bills as possible, if you can pay off the card in full. It’s always nice earning some extra cash (or airline miles) by just paying what you owe.