When it’s wise (and unwise) to use your credit card for bills

Whether you’re aiming to hit the minimum spend for a welcome bonus or accumulating miles for your next trip, paying for daily expenses with a credit card can offer significant value. No enthusiast of points and miles wants to miss out on potential rewards or cash back.

Naturally, adhering to the fundamental rule of credit card management is essential—always pay your balance on time and in full each month. If you stick to this principle, you can dodge interest fees, maintain your credit score, and even earn rewards along the way.

Using rewards credit cards to pay various bills and expenses can yield substantial advantages. However, even with responsible credit card use, there are some transactions you might prefer not to charge.

Here’s how to determine which bills to pay with a credit card and when it’s best to keep those cards tucked away in your wallet.

How to evaluate whether to use a credit card for bill payments

Can you pay off the entire balance?

Charging more to a credit card than you can pay off within a billing cycle can lead to costly interest fees. As of the second quarter of 2024, the average annual percentage rate (APR) on interest-bearing credit cards exceeded 20%, as reported by the Federal Reserve.

Therefore, it’s crucial to monitor your credit card's APR (especially if you carry a balance).

Even with a 0% APR offer, carrying a balance on your credit card each month has its drawbacks. Credit card debt can lead to hidden costs, such as a higher credit card utilization rate that may negatively impact your credit score. Generally, it’s advisable to use your credit card only for expenses you can pay off by the due date on your next statement.

Are there additional charges for using your credit card?

Another factor to consider before entering your credit card details to pay a bill is whether the creditor or merchant imposes a surcharge. Due to bank interchange fees, it’s not unusual for landlords, utility companies, and other service providers to pass these costs onto customers opting to pay with a credit card.

In some instances, you might discover alternative options to avoid surcharges. For example, using the Bilt Mastercard® allows you to pay rent with a credit card without incurring transaction fees (see rates and fees). Additionally, consider switching to a competitor that doesn’t impose extra charges for credit card use. However, there are times when these costs are unavoidable unless you opt for a different payment method.

If a creditor or merchant charges a surcharge on credit card transactions, you’ll need to evaluate the costs to determine if the potential rewards are worth the fees you'll incur.

TPG's monthly points and miles valuation chart can assist you in calculating the numbers. Keep in mind that if you're trying to meet the minimum spending requirement for a welcome bonus or aiming for extra points, miles, or cash back from a bonus category, your calculations might vary.

Is fraud or purchase protection a priority for this transaction?

One significant advantage of using a credit card whenever possible is that debit cards, cash, and traditional checks do not provide the same level of protection. For instance, your fraud liability may increase if someone uses your debit card for unauthorized transactions. Thanks to the Fair Credit Billing Act (FCBA), you have the ability to dispute credit card charges in certain cases, including incorrect billing amounts and undelivered goods and services.

Certain credit cards provide purchase protection, which can reimburse you for the repair or replacement of items bought with your card. Additionally, many credit cards offer extended warranty benefits to safeguard you if a purchased item breaks after the manufacturer’s warranty has expired.

Key takeaways

There are some expenses you likely shouldn’t charge to your credit card. If you’re unable to pay off your entire credit card balance each month to avoid costly interest fees, it may be wise to pause using your credit card until you reduce your credit card debt and develop a strategy to prevent future overspending.

However, when used wisely, it’s advantageous to pay with a credit card whenever you can settle the balance in full and avoid surcharges. Even if there are surcharges, if the rewards and benefits you gain from using your credit card outweigh those fees, it could still be worth it to use your card.

Check Bilt Mastercard rates and fees here.

Explore Bilt Mastercard rewards and benefits here.