Credit cards are one of the best financial instruments for those who know to use it well. With credit cards, one is not required to carry a huge amount of cash every time the person goes shopping. There are a number of benefits of credit cards but if you do not use it judiciously, you will end up in a financial mess which will lead your credit score spiralling downwards.
One should know when and where to use the credit card and manage his purchases in such a way that he will be able to reap maximum benefits from it. In this article, we will discuss when you should pay your bills using the credit card and when to avoid using your credit card to make payments.
Payment of your bills using the credit card is advisable when…
You plan to pay some bills monthly automatically
The biggest benefit of credit cards is that you can set-up auto-pay option to make payments of your monthly fixed bills such as telephone bills, postpaid bills, internet bills, cable connection bills, subscriptions, etc. Any other recurring expense can be also registered for auto-pay using your credit card to enjoy uninterrupted services.
Auto-pay allows you to register for the service once by mentioning your card details. You are not required to go to the billing section and make the payment every month as the amount is auto-debited from your credit card account before the due date every month. You need not set alerts every month to pay for the services as your service provider will deduct the amount directly from your account.
You want to earn on your spendings
When you pay your bills using your credit card, you get additional benefits such as cashback, discounts and rewards as per the plan on your credit card. Almost all credit cards offer one Rewards Programme or the other. In case you have a credit card that provides huge rewards on your purchases, using that card for payment of your bills will ensure that you will earn on your spendings.
Earnings can be in the form of rewards points or Airmiles which can be redeemed for various services. You can also get an instant discount or cashback on your bills using your credit card. Even though the amount is not that huge but every penny saved is a penny earned.
You want customer protection on your purchases
There are various credit cards that offer a number of benefits which many cardholders are not aware of. Some of these perks are purchase protection, guaranteed returns, zero-fraud liability, travel insurance, etc. You can avail these facilities free of cost. Also, in case you get travel insurance on the card and you book a ticket using the card, your travel is insured by the company.
The cardholder is also eligible for personal accidental insurance and air travel insurance on most of the credit cards issued in India.
You want to track your spendings
All transactions made on your credit card are mentioned in the credit card statement that you receive at the end of every billing cycle. When you use cash for transactions, you are not able to keep a track of expenses. However, when using your credit card for making transactions, you can easily track your spendings on the card and plan your finances accordingly.
You do not want to send cheques for payments
You should use your credit card for making payments instead of sending cheques for making payments every month. Even though it does not cost much on making payment through cheques, the payment using credit cards is instant and the cardholder gets additional rewards as well.
Payment of your bills using the credit card is NOT recommended when…
The biller charges a fee for making payment using credit cards
Some billers charge a convenience fee for making payments using the credit card on their platform. In case you use your credit card for paying bills on platforms that charge a convenience fee, you should use payment methods other than credit cards.
You already have outstanding bills on your card
You should not use your credit card for bill payments if you already have an outstanding amount from the previous month’s statement. If you keep on using your credit card when you already have dues with interest increasing every day, you will end up in huge debt which becomes very tough to repay.
You can take a personal loan instead of using the credit card
Circumstances may arise when you might need money to fulfil your needs such as for holidays, buying an appliance, etc. You should go for a personal loan if the amount is considerable as the interest rate on credit cards is higher than that of personal loans.
The Bottom Line
When you use your credit cards wisely for paying bills, you will end up getting more benefits and saving more on your expenses. Credit cards can provide you with huge earnings in the form of reward points, cashback, offers, discounts and more. However, you should be cautious when using the card as it may cost you more while making payments on specific portals.