Should You Pay Bills With Your Debit (or Credit) Card?
Debit and credit cards are both useful tools for shopping online and in person. But you can also use your cards to pay bills like tuition, taxes, utilities (electricity and water, for example), and more. Payment by card is instant—which is helpful if your due date is approaching—and you don’t need to dig up your checkbook.
While it’s convenient to pay with plastic, it’s not always the best option, so get familiar with the pros and cons.
Setting Up Payments
Paying with a card is typically just a matter of providing your card information to a biller. It can be as simple as typing in your card number, zip code, and other details in an online form or app. Alternatively, you might mail in that information—which is still easier than mailing checks every month.
How to Pay Online
Log in to your account and look for options to "make a payment" or "set up automatic payments." In some cases, you don’t even need to log in—you’ll just provide enough information for the biller to find your account. However, it might be best to log in when you have the option. Doing so often makes it easier to track (and prevent) any problems if you do everything while logged in. Once you’re logged in, enter your card number and agree to 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 with a card, even if you receive bills on paper. For example, a medical office might send a bill that offers several payment options. In addition to sending a check, you can call and provide your card information over the phone. That’s often easier than filling out the form, finding a stamp, and mailing the payment back to the biller.
Alternatively, you can write your card information on the payment slip and drop it in the mail. Using the phone is the better option if you're coming up on the payment’s due date.
Whatever method you use, be prepared to provide the following:
- The card number
- Your billing address for the card
- Your name as shown on the card
- The card's expiration date
- The security code on the back of the card (often a three-digit number)
Risks and Costs
While payment by card is convenient, other methods might be better for you, depending on your circumstances.
Taking on Debt
If you're using a credit card, going into debt is a risk. Your card balance increases while your checking account balance remains unaffected. If you don't have the discipline to pay off the entire card balance every month, you may end up in debt.
If you think that’s a risk, keep doing it the old-fashioned way (there's nothing wrong with that—all that matters is that you know yourself and keep yourself out of harm's way). Racking up debt means high-interest charges, and you might end up in a hole that you can't get out of. Alternatively, you can use a debit card linked to your checking account to avoid debt. If you do so, be aware that you could put your checking account at risk.
Lowering Credit Scores
You might want to pay off those credit cards more often than every month to avoid damaging your credit. Credit scoring models give higher scores when you use a relatively small percentage of your total available credit (less than 30% is ideal). If you use too much—even if you pay the balance in full every month—it can look like you're getting in over your head.
It’s okay to make several payments per month, especially if any bill takes up a significant portion of your credit limit.
Racking up Fees
In many cases, there are no additional fees when you pay bills with plastic. But some organizations charge extra, so you need to pay attention to the totals before you click submit. If you keep a credit card, you might also pay an annual fee to your card issuer. Make sure it's really worth it if you're paying bills with the card in pursuit of rewards.
When you pay with a debit or credit card, especially if you make the payments automatic, things can get out of control without you realizing it. You’re likely to pay less attention to your bills and miss expensive errors, rate increases, or charges for services you no longer use. When you use a debit card, there's a chance that you'll bounce a few checks or owe overdraft fees. Finally, you might simply feel the pain of spending less, which makes it easy to overspend.
Be sure to pay down your balances any time you approach 30% of your credit limit. For example, if your limit is $1,000, try to keep your balance below $300.
Given the pitfalls above, you might wonder if it’s a good idea to pay bills with your card, but there are several benefits.
Rewards are often a primary motivation for paying bills with a credit card. Sure, you might rack up points or earn cash back, but there are other good reasons as well. Even if you use debit cards, which are less generous but can offer rewards, it still might be smart to put bills on your card.
When you pay with plastic, there's no need to wait on the mail, write checks, find a stamp, or even log into your bank account’s online bill payment system. If you deal with paper at all, you might write down your credit card information and mail it in, but at least you won't use up your supply of checks. The easiest approach is to make payments automatic, so you don't have to do anything—but that can cause problems, as described above.
Along similar lines, it's easy to keep track of expenses when you pay with a credit card. Your card issuer automatically creates an electronic record of every transaction, so it's easy to categorize your spending and see where your money goes. Your bank (or an app like Mint or Tiller) might even categorize expenses for you.
Tracking expenses helps you understand where your money goes and verify that you’re working toward your goals.
Managing Cash Flow
How many bills do you get each month? If it's more than a handful, life might be easier if you pay with a credit card. There's no need to log in to your checking account every time a bill comes due to make sure there's enough cash available. Instead, you can just put all your bills on your credit card and pay it off with one large payment every month. However, if you use a debit card, you will need to make sure funds are available.