Should I be paying bills with a credit card?

Accumulating credit card points and rewards is addictive, and we’re all on the lookout for new ways to obtain them.

Paying your monthly bills seems like a great way to earn more rewards. But is it wise to pay your bills with credit cards?

Not all bills are created equal, so you’ll need to evaluate each one to determine which ones make sense to pay with a credit card. But first, here’s a quick look at the pros and cons of paying bills with plastic.

Generally speaking, paying your monthly bills by credit card can be a good idea as long as you adhere to two rules.

1. Always pay your balance in full and on time each month.
2. Never put bills on a credit card because you can’t afford to pay them.

If you use your credit card to pay bills you can’t afford, you could end up paying a lot in interest. On the other hand, if you’re paying routine bills, using a credit card has benefits.

So which bills can you pay with a credit card? And which bills will charge an extra fee if you pay with a card? Let’s look at which types of bills make the most sense to pay by credit card.

• Mortgage
• Rent
• Car payment
• Car and home insurance
• Health insurance
• Taxes
• Utilities, cellphone, internet, cable
• Subscription services
• Student loans

Mortgage

As the highest monthly expense for most consumers, mortgages look like an easy way to achieve that credit card sign-up bonus or accumulate significant points.

Sadly, virtually no mortgage servicers will allow credit card payments. And they have a good reason: Lenders don’t want to bear the credit card fees for processing the payments.

If you are lucky enough to find a mortgage servicer that will allow you to pay your mortgage with a credit card, be prepared to pay a convenience fee that will likely exceed the benefits you’re hoping to get.

If you don’t mind a fee, third party services such as Plastiq might be a good option for you. For a standard 2.85% fee, the company charges your credit card and sends a check to your mortgage lender (or anyone else you might want to pay). Before using this type of service, you’ll have to calculate if the fee is worth the rewards.

Rent

Those without a mortgage may also be interested in paying for their housing with a credit card. Unfortunately, there are still scores of landlords who accept only checks or cash for monthly rent payments.

If you’re lucky enough to rent from a company with more sophisticated bookkeeping, consider using your credit card to pay your rent, especially if there is no fee for the convenience.

Even with landlords that accept only cash or checks, you have options that include services such as Plastiq. None of these alternatives come without a price — like convenience charges or fees — but you get to decide whether the benefits outweigh the rewards.

Car payment

Just as mortgage lenders aren’t likely to accept credit card payments, neither are auto lenders. They, too, want to avoid the processing fees.

There is, however, a way to use a credit card to pay off your car loan, but it requires some serious financial discipline. If you find a credit card offer with a 0% introductory annual percentage rate for balance transfers, you may be able to transfer your car loan to the credit card. But before you jump on this idea, there are caveats.

Here’s one caveat: It only makes sense if you choose a card with a 0% introductory APR that applies to balance transfers. Also, you’ll need to pay off the balance before the rate goes up after the introductory period. Otherwise you’ll be paying interest on the remaining debt on the credit card, and the credit card will likely have a higher interest rate than the original auto loan.

There are other downsides. For example, you may not be able to transfer the entire car loan to a balance transfer card. And depending on the card, you may be charged a balance transfer fee. Also, there will likely be a negative impact on your credit as transferring a large balance will increase your credit utilization.

Given all the caveats, paying your car payment with a credit card isn’t generally the most practical option. You’ll have to consider the downsides and determine if it makes sense in your case.

Car and home insurance

It’s easy to set this up with most insurance companies, but do your homework to make sure you aren’t incurring any fees. Some insurers don’t charge a fee, while others are fee-free only if you pay the premium in full rather than installments.

So it can make sense to pay these bills with your credit card, but only if you can avoid fees.

Health insurance

For the self-employed among us, health insurance premiums must be paid to the insurance company.

And with the price of health insurance these days, this expense can earn you excellent credit card rewards. As companies try to reduce their operating expenses, however, some have decided to stop accepting credit card payments. If your insurer still accepts cards, take advantage of the opportunity and sign up to pay your premiums by credit card.

If you are covered under the Affordable Care Act, insurers don’t have to accept credit cards unless the applicable state requires it. So payment options may vary from state to state and among insurers.

Taxes

You can pay some taxes with a credit card, but you’ll generally have to pay a fee.

For example, income taxes can be paid by credit card, but the IRS does charge a fee for that convenience. Several variables — such as amount owed and what type of federal taxes you want to pay — may also affect your decision.

Utilities, cellphone, internet, cable

Phone companies as well as cable and internet providers have realized that credit card payments save time and paperwork for everybody. It’s easy to set these payments up, and many of these companies don’t charge a fee.

This isn’t always the case for your electric, gas, water and trash removal bills though. For instance, Pacific Gas and Electric Co. in California charges a $1.35 convenience fee to accept credit card payments.

The higher your utility bill is, the more advantageous it becomes to pay by credit card, even with the convenience fees.

Subscription services

Pandora, Netflix, Spotify, Hulu and broadcast network subscription services encourage you to pay with a credit card, and there’s no fee. These are the perfect monthly bills to put on a credit card.

Student loans

Depending on who loaned the money, repayment by credit card may be possible for student loans.

If you’re using a card with cash back rewards, consider making your student loan payment, getting cash back, and then applying that cash toward your student loan, thereby paying it down sooner than scheduled.

Bottom line

Paying some of your monthly bills with a credit card makes sense. The importance of paying off your credit card balance each month, however, cannot be overstated.

With careful planning and good judgment, you can pay many of your bills by credit card. You can earn rewards, achieve that sign-up bonus and even get a little extra time to pay by putting monthly expenses on a credit card wherever it makes sense.