Putting monthly expenses on your credit card can offer many benefits, such as earning travel rewards, setting up automatic payments, having a way to track expenses and getting more time to pay for what you buy. How should you choose which monthly expenses to put on your credit card?
The key factor in considering this payment strategy is being sure you can cover the cost of monthly expenses as well as any other purchases you put on your credit card. The goal is to pay your balance in full on time each month. Otherwise, you could take on debt and interest charges or damage your credit score.
If you aren’t able to pay the balance in full each month, it’s important to look at your credit utilization rate—how much credit you are using compared with the amount available to you with the credit card. Using too much credit could decrease your credit score, which in turn could affect you in several ways. It could prevent you from getting other credit cards approved, getting loans at favorable rates, if at all, or even getting hired for a job.
Budgeting is crucial for making credit cards work for you instead of racking up interest on unpaid balances. Another important step is to calculate if it's worth it to pay any associated fees, such as the annual fee that some credit card companies charge. As long as you realize how to use credit cards wisely, consider paying these five monthly expenses with one:
Using a credit card to pay monthly bills for household essentials such as electricity, gas, water, sewer service and trash collection makes sense. Since you really can’t do without these things, you should have a budget that covers all of them. You can't trim from this area, unlike nonessential items such as dining out and entertainment.
First, check if the utility companies take credit card payments and if they charge a fee for it. If they do charge a fee, look at the amount of your bill and calculate whether you'll earn enough rewards points to make it worthwhile. Another benefit to consider is the convenience and time savings that come with setting up automatic payments linked to your card.
2. Cell Phone, Internet, Cable
Phone companies, as well as cable and internet providers, make it easy to set up these payments and typically don’t charge a fee for credit card payments. Some credit cards include theft and damage insurance for your phone and double or triple points for phone bills.
3. Streaming Services
Streaming services such as Pandora, Netflix, Spotify, Hulu and Disney+ accept credit cards without charging additional fees. Multiple credit card companies offer about 5 percent or 6 percent cash back or double or triple points for payments for some of these services. As long as you have budgeted for these entertainment expenses, it’s the perfect kind of bill to put on a credit card.
Be sure to keep track of these costs, especially if you have them set up on auto-pay. If your income fluctuates and you don’t have enough to cover them after essentials such as groceries, mortgage or rent and a car payment, you’ll want to cut back and avoid costly interest charges on your credit card.
4. Student Loans
You may be able to pay and automate student loan payments with a credit card, depending on the loaning entity or the school. Many schools charge convenience fees, though, to offset the processing fees they have to pay to the credit card companies. Like other monthly payments, calculate whether the value of the rewards is worth the fee.
If you have a card offering cash-back rewards, however, this can help if you in the long run if you apply that cash toward your paying off your student loan. That will allow you to save money on interest payments and get out of debt faster.
5. Car and Home Insurance
Most insurance companies allow credit card payments, but be sure they aren’t charging fees that exceed the value of earning rewards on your credit card. Some companies will waive a credit card processing fee if you pay the premium in full instead of on a monthly or quarterly basis.
What About Paying My Mortgage or Auto Loan With a Credit Card?
Almost no lenders accept credit card payments for mortgages and car loans. The few that do charge convenience fees that usually exceed the value of any benefits. You could tap a bill pay service that allows you to make a credit card payment to your bank, but the associated fee for such a service, of up to 2.5 percent of the transaction, typically is more than the value of credit card rewards.
One option for paying off an auto loan with a credit card would be to put the balance on a credit card offering a 0 percent introductory rate. In doing so, though, you need to look at the terms, including whether there is a fee for transferring the balance to the card. You also should be sure you can pay the balance during the introductory time period, which is usually about a year or 18 months. After that period, you’ll be faced with a high-interest rate of about 17 percent or more.
If you have multiple credit cards, consolidating that debt onto one card with a lower interest rate can save a significant sum every month and also make monthly payments quick and easy. Fifth Third Bank’s credit card consolidation calculator lets you find out in just a few minutes how much you could be saving in interest, which can help you pay off credit card debt faster.
Using this strategy of leveraging credit cards for paying monthly expenses works well if you do so responsibly, with good budgeting. That lets you earn rewards, meet the spending requirements for a sign-up bonus and establish a good credit score. This lays the groundwork for making monthly expenses easier and less stressful while taking advantage of perks for things you enjoy in life.