Debit and credit cards are useful tools for shopping online and in stores. However, you can also use your cards to pay bills such as tuition fees, taxes, and utilities (like electricity and water, for example) and more. Payments made by card are immediate – which helps if your due date is approaching – and you do not need to hunt for your checkbook.
Setting Up Payments
Paying by card usually involves providing your card information to the entity owed the bill. It can be as simple as entering your card number, zip code, and other details into a form or an online application. Alternatively, you may send this information by mail – which is easier than sending checks every month.
How to Pay Online
Log in to your account and look for “Make Payment” or “Set Up Automatic Payments” options. In some cases, you may not even need to log in – just provide enough information for the entity owed the bill to locate your account. However, it may be better to log in when you have the option. This often makes it easier to track (and prevent) any issues if you do everything while logged in. Once logged in, enter your card number and agree to the terms, whether you’re making a one-time payment or setting up automatic billing.
How to Pay by Mail or Phone
You can pay bills using your card, even if you receive the bills on paper. For example, a medical office may send a bill offering multiple payment options. In addition to sending a check, you can call and provide your card information over the phone. This is often easier than filling out a form and looking for a stamp and sending the payment to the entity owed the bill. Alternatively, you can write your card information on the payment slip and drop it in the mail. Using the phone is the best option if you are approaching the payment due date.
Regardless of the method you use, be prepared to provide the following information:
- Card number
- Your billing address
- Your name as it appears on the card
- Card expiration date
- Security code on the back of the card (usually a three-digit number)
Risks and Costs
While paying by card is convenient, there might be better ways for you, depending on your circumstances.
Debt Accumulation
If you’re using a credit card, debt is a risk. Your card balance increases while your checking account balance remains unaffected. If you do not have the discipline to pay off your card balance in full each month, you may find yourself in debt. If you think this is a risk, continue doing it the traditional way (there’s nothing wrong with that – all that matters is knowing yourself and keeping yourself out of harm). Accumulating debt means paying high-interest fees, and you may find yourself in a hole you cannot get out of. Instead, you can use a debit card linked to your checking account to avoid debt. If you do this, be aware that it can put your checking account at risk.
Credit Score Deterioration
You may want to pay those credit cards more frequently than once a month to avoid damaging your credit. Credit scoring models give higher scores when you use a relatively small percentage of your total available credit (under 30% is ideal). If you use too much – even if you pay off the balance in full each month – it can appear that you’re struggling with debt. It is acceptable to make multiple payments in a month, especially if any bill takes up a significant portion of your credit limit.
Accumulation
Fees
In many cases, there are no additional fees when paying bills with a card. However, some organizations charge extra fees, so you should pay attention to the totals before clicking submit. If you carry a credit card, you may also pay an annual fee to your card issuer. Make sure it’s worth it if you’re paying bills with the card in order to earn rewards.
Loss of Control
When you pay with a debit or credit card, especially if you set up automatic payments, things can get out of control without you realizing it. You’re likely to pay less attention to your bills and miss costly errors, price increases, or service fees that you no longer use. When using a debit card, there’s a chance you’ll bounce a few checks or incur overdraft fees. Finally, you may feel less pain from spending, making it easier to overspend.
Note: Make sure to pay down your balances any time you get close to 30% of your credit limit. For example, if your limit is $1,000, try to keep your balance below $300.
Benefits
Given the risks mentioned above, you might wonder if it’s a good idea to pay bills with your card, but there are many benefits.
Rewards
Rewards are often the main incentive for paying bills with a credit card. Sure, you may earn points or cashback, but there are other good reasons as well. Even if you’re using debit cards that are less generous but can offer rewards, it may make sense to put bills on your card.
Convenience
When you pay by card, there’s no need to wait on the mail, write checks, or hunt for stamps, or even log into an online payment system for your bank account. If you’re dealing with paper at all, you might write your credit card information and mail it, but at least you won’t use up your supply of checks. The easiest way is to set up automatic payments, so you don’t have to do anything—but this can create problems, as noted above.
Easy Tracking
On the same note, it’s easy to track spending when you pay with a credit card. Your card issuer automatically creates an electronic record for each transaction, making it easy to categorize your spending and see where your money goes. Your bank (or an app like Mint or Tiller) may even categorize expenses for you.
Note: Tracking spending helps you understand where your money goes and ensures you’re working towards your goals.
Cash Flow Management
How many bills do you receive each month? If it’s more than a few, it may be easier to pay with a credit card. There’s no need to log into your bank account every time a bill is due to ensure enough cash is available. Instead, you can just put all your bills on your credit card and pay it off in one big payment each month. However, if you’re using a debit card, you’ll need to ensure the funds are available.
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Sources:
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
Consumer
Financial Protection Bureau. “How Do I Get and Keep a Good Credit Score?”
Source: https://www.thebalancemoney.com/how-to-pay-bills-with-your-debit-credit-card-315033
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