This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Rewards Roulette: Can You Pay All Your Bills With Your Credit Card?





When Beverly Harzog's dog needed surgery in August, she paid the $1,086 veterinary bill with her rewards credit card.

"I figured I might as well get a little bit back on it," says Harzog, a credit card expert, author and consumer advocate from Atlanta. A little she did - 1 percent cash back for $10.86.

Harzog advocates paying for your purchases and recurring bills with your credit cards whenever possible to reap the rewards.

But her credit card advice comes with a huge caveat: Pay your bills with credit cards only if you pay your balance off in full each statement. "If you pay interest on your balance, you don't make money even with the rewards you can earn," she says.

Personal finance columnist Liz Pulliam Weston of Los Angeles couldn't agree more: "Paying your bills with plastic is a good strategy but only if you pay your credit card bills off in full each and every month. Otherwise, you're paying unnecessary interest, and that's just dumb."

Technology makes credit cards easy to use

Thanks to technology, these days you can pretty much buy or pay for anything with credit cards, except perhaps for a house. Most mortgage lenders won't let you make your monthly payments with a credit card because they don't want to pay merchant fees. Most brokerage firms don't let you buy stocks with credit cards either, even online brokers. They want your real money - skin in the game so to speak.

Still, you can charge everything from your monthly electric and mobile phone bills to your groceries and back-to-school shopping. Put it on a credit card and you can pile up some great rewards along the way.

Credit card issuers like when you use their cards to pay your bills because they earn merchant fees, Weston says.

Perks of paying with plastic

In addition to accumulating rewards, here's why you might want to use plastic rather than cash at the register and for recurring bills:

  • The more you spend, the greater the perks. Once you hit certain spending thresholds on your rewards credit cards, you may qualify for additional perks or benefits, says Amber Stubbs, managing editor of CardRatings.com. For example, she says, with hotel rewards credit cards, once you spend enough for elite status, you qualify for automatic room upgrades, concierge services, free Internet access and free breakfasts. Stubbs and her husband are hoping to have enough rewards on their American Express Starwood card that when they travel to Europe their hotel stays will be free.
  • You have backup. "You get a middleman to help with any disputes that may arise with billers," Weston says. When the purchase or service is on a credit card, if you're unhappy with it for any reason, your credit card company can help you work out your dispute with the merchant.

Pitfalls of paying plastic

And here's why you might want to be cautious about paying all your bills with credit cards:

  • Charges can affect your credit. If your monthly charges put you close to your card's credit limit, you could harm your credit score. "Credit card purchases push up the amount you owe compared to your available credit," Weston says. "And that can be bad for credit scores. To have good scores, you need your credit utilization to be below 30 percent; below 10 percent is best." If you're applying for a mortgage, a car loan, or insurance, you probably don't want to be spending a lot of money on your credit cards just for the rewards, Harzog agrees.
  • Plastic is easy. People tend to be a little more lax about their spending when they put purchases on their credit cards rather than paying with cash or check. "When you're standing at the register, you should ask yourself: 'If I were paying for this in cash, would I still buy it?' If the answer is no, reconsider," Stubbs says.
  • You need to be more diligent. You must check your credit card statements with extra care to catch any problems. Most people tend to be more casual about checking their credit card statements than they are about checking their bank statements or balances, Stubbs says. If you're not careful, you could be billed for a service you're no longer getting, Weston says.
  • The rewards can change without notice. You may have your eye on a great reward -- a free vacation or a free flight -- and before you have saved enough points the program changes and it's no longer an option. Not much you can do about that, Harzog says. Studies show that about a third of rewards points get tossed in the trash, she notes. If you're paying all your bills on your credit card for that special reward, keep track of your balances and don't let them expire. Harzog keeps track of her rewards with a spreadsheet, just to be safe.

Settlement could change landscape

Thanks to the recent settlement in the government's antitrust lawsuit against Visa and MasterCard, retailers can charge higher prices to customers who pay with their credit cards.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,051.73 -48.45 -0.28%
S&P 500 1,973.63 -4.59 -0.23%
NASDAQ 4,424.7040 -7.4420 -0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs