Credit cards are widely accepted by vendors, travel agents, hotels, malls, or any other place making them one of the most useful financial tools in today’s cashless times. They are also a popular mode of paying bills as most credit card issuers offer customers reward points and benefits when they use the card to make bill and other payments.
Credit cards, if used wisely and in a disciplined manner, act as an effective financial management tool. They also allow the user to build a good credit score. But is it sensible to pay your bills with a credit card? Let’s find out.
Pros and Cons of Using Credit Cards to Pay Bills
Using credit cards for the payment of bills offers certain advantages while exposing the user to certain risks too.
The pros of using a credit card to make bill payments are:
- You earn credit card reward points that can be accrued and exchanged for special offers, discounts, and benefits.
- You get ample time (till the end of the credit cycle) to repay the amount used to pay the bills.
- You get the option to pay the bill amount by breaking it into small EMIs that are automatically deducted from your credit card.
- You get automatic reminders of future bills if you have used a credit card once to pay a bill.
- Payments are quicker thus saving a lot of time.
- You do not have to write cheques or personally go and deposit the bills.
- You can track your bill payments and other expenses easily by simply checking your credit card statement.
The cons of using credit cards for paying your bills are:
- You may have to pay some fees for using the credit card for bill payments.
- You may have to pay additional interest in case you do not make the full credit card payment at the end of the credit card cycle.
- Your credit utilisation levels may go up thereby hurting your credit scores. This may affect your creditworthiness and the ability to get loans in the future.
You can avoid these problems by comparing credit cards and choosing the one whose terms and conditions are the most favourable to you. You need to check the credit card interest rates, the type and nature of rewards offered by the issuer on the usage of a credit card and the applicable fines and charges on late payment of your credit card dues. You can also avoid unnecessary interest charges by using credit cards in a disciplined manner. This means you pay off the due amount on your credit card before the due date.
Another rule to follow while using credit cards is to use them only for bills that you can afford to pay. Do not go overboard and use your credit card to shop for extravagant things that you are unable to pay for even in the long run.