Paying with a credit card is an excellent way to strengthen your credit score and access beneficial rewards. Plus, purchases are quick and convenient. In 2021, over 58,900,000 UK residents used a credit card, but should you be paying bills with a credit card?
Today, we are looking at the benefits and drawbacks of paying bills with a credit card to help you decide if this is the route for you. Scroll down to learn more.
Benefits of Paying Bills With a Credit Card
There are numerous benefits and reasons to use your credit card to pay bills. These handy cards are advantageous for various reasons, from keeping your credit card active to ensuring on-time bill payments. Here are the top credit card benefits:
- You receive credit card perks while paying bills (e.g. earning points or travel miles).
- It keeps your credit card active. This is important for the longevity of your credit history.
- Credit cards ensure your bill payments are on time, further strengthening your credit score.
- Credit cards give you purchase protection.
- You can earn a welcome bonus (if applicable with your card).
Is It Safer To Pay Bills With a Credit Card or Debit Card?
You can use both credit and debit cards to cover your bills, and there is no right answer for everyone.
However, when it comes to paying bills in the UK, a credit card often offers more protection against fraud than debit cards. This is because credit cards are not linked to the full balance in your bank account, but are a line of credit offering you access to a specific credit limit instead. Using a credit card is something to consider if you want to protect your financial details.
Which Bills Can You Pay With a Credit Card?
If you are looking for a good way to pay bills, using a credit card can help (as long as you keep up with repayments). Here are some of the bills you can pay with a credit card.
- Mobile phone contracts
- Utility companies (e.g. Energy bills)
- Insurance companies
- Internet bills
- Subscription services (e.g. Netflix or Prime)
- Gym memberships
What Should You Not Pay With a Credit Card?
You can’t pay your rent, mortgage, car payments or student loans with a credit card.
Larger purchases can also wipe out your credit. After a large purchase, you will still have to pay off the amount, often with higher interest fees. Never borrow more than you can afford; always make timely payments to avoid weakening your credit score.
Is It Better To Pay Everything With a Credit Card?
Using a credit card responsibly can benefit your credit score, protect you against fraud, give you rewards, help you track your spending and provide better buyer protection. Therefore, if you can make full monthly repayments and are not in credit card debt, using a credit card frequently is a good idea.
However, if you cannot repay your total balance every month, using a credit card to make everyday purchases or pay regular bills might not be the best solution for you.
More Information
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Check out our other great content in our Info Hub, with articles about the different types of credit products, money management tips and help with saving money!
FAQs
Making bill payments with your credit card can have some advantages. These could include: Credit building: Using your card responsibly over time by doing things like making on-time monthly payments can help you build a credit history and improve your credit scores.
What happens when you use all your credit on your credit card? ›
When you max out a credit card or exceed your credit limit, your credit card issuer might raise your interest rate for that card. This is commonly known as the penalty rate. The high interest rate can make your payments higher as well, which could further affect your finances.
Is it bad to use a credit card for everything? ›
Keep your credit utilization low.
Resist the temptation to spend more than you normally would just to earn bonus points. Overusing your card can spiral out of control quickly and put you into serious debt. Additionally, using more than 30% of your available credit can bring your credit score down.
What bills should you never pay with a credit card? ›
3 Expenses You Should Never Put on a Credit Card
- You shouldn't try to pay your monthly mortgage or rent on your cards.
- You don't want to put medical bills on a credit card, either.
- It's a bad idea to charge impulse purchases you can't afford on a credit card.
If you keep up with your utility, rent and phone bills and that activity is reported to credit bureaus, it could help boost your credit. That's because your payment history is an important factor when it comes to your credit scores.
Is it good to always pay with credit card? ›
Responsible Credit Card Uses
Many of us use credit cards irresponsibly and end up in debt. However, contrary to popular belief, if you can use the plastic responsibly, you're actually much better off paying with a credit card than with a debit card and keeping cash transactions to a minimum.
What happens if you use 100% of your credit? ›
While spending over your credit limit may provide short-term relief, it can cause long-term financial issues, including fees, debt and damage to your credit score. You should avoid maxing out your card and spending anywhere near your credit limit. Best practice is to try to maintain a low credit utilization rate.
How much should I pay on a $500 credit card? ›
$500 — When you have a credit limit of $500, ideally your balance is $150 or less. $1,000 —If your credit line is $1,000, this means you should aim for a balance of $300 or less to maintain your credit utilization.
What happens if I use 90% of my credit card? ›
Helps keep Credit UtiliSation Ratio Low: If you have one single card and use 90% of the credit limit, it will naturally bring down the credit utilization score. However, if you have more than one card and use just 50% of the credit limit, it will help maintain a good utilization ratio that is ideal.
Should I pay off my credit card in full or leave a small balance? ›
If you have a credit card balance, it's typically best to pay it off in full if you can. Carrying a balance can lead to expensive interest charges and growing debt. Plus, using more than 30% of your credit line is likely to have a negative effect on your credit scores.
In most cases, however, it's best to keep unused credit cards open so you benefit from longer credit history and lower credit utilization (as a result of more available credit). You can use the card for occasional small purchases or recurring payments to keep it active as opposed to using it regularly.
Is it worth keeping credit cards you don t use? ›
When possible, avoid closing your credit cards and look for alternative options to reign in your spending. If you are trying to save on interest, consider a balance transfer or 0% APR credit card. “In general, it's a good idea to keep all of your credit cards open, even if you aren't using them,” advises Tayne.
What is the trick for paying credit cards twice a month? ›
Instead of only paying at the end of the statement, you make one payment about halfway through your statement (15 days before it's due) and a second payment right before the due date (three days before it's due).
Can I pay my car payment with a credit card? ›
Although it's not common, some lenders may let you make car payments with a credit card, but it could be a costly move that may damage your credit score. If you use a 0% intro APR credit card, you could pay off your car loan with no interest, but watch out for high fees, and make sure not to fall behind on payments.
What is the number 1 rule of using credit cards? ›
Pay your balance every month
Paying the balance in full has great benefits. If you wait to pay the balance or only make the minimum payment it accrues interest. If you let this continue it can potentially get out of hand and lead to debt. Missing a payment can not only accrue interest but hurt your credit score.
Is it better to make payments or pay in full on a credit card? ›
Carrying a balance does not help your credit score, so it's always best to pay your balance in full each month. The impact of not paying in full each month depends on how large of a balance you're carrying compared to your credit limit.
What are the pros and cons of credit card payments? ›
Credit cards offer convenience, consumer protections and in some cases rewards or special financing. But they may also tempt you to overspend, charge variable interest rates that are typically higher than you'd pay with a loan, and often have late fees or penalty interest rates.
Is it safer to pay bills by check or credit card? ›
Credit cards are generally considered the most secure due to their robust fraud protection measures. Most issuers offer zero fraud liability, adding a second layer of protection. Also, it's usually easier to flag fraudulent transactions and manage your card in comparison with other payment methods.
