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I have a rewards card I really like and we have about $5k in bills monthly. Almost all of them I could setup to pay out of this card. That would earn about $600+ in rewards annually, which would make Christmas time that much easier.

Assuming I paid it in full each month just as if it were a consolidated monthly bill of our actual bills, are there any cons to doing this? Online articles seem to suggest it is a good idea if you can pay them in full each month, which we would do and have no issue doing so.

The card would be used exclusively for our monthly bills, so the accounting aspect will be easy enough, and we thought we would setup the bills on auto-pay and then set the payment date for the credit card to the 30th of the month and just make a single "bill payment" monthly.

I didn't find any other questions here regarding this in a search, so I'm wondering if it is a wise move or if there are downsides to doing so.

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    Welcome to Money.SE. There are cards that are 2% reward, twice what you suggest. The card we have puts the reward into a 529 College savings account, and that account balance has just passed $19K. My daughter is 15, and I'm expecting this account to cover a full semester of college. Downide? I'll deal with it. – JTP - Apologise to Monica Nov 22 '13 at 19:10
  • Thanks Joe. $1200 in annual rewards would be nice. Time to look around for card options. Do you have examples of 2% cards (for paying bills) or is that something I need to find on my own (not allowed to discuss here)? – TheCleaner Nov 22 '13 at 19:26
  • It's ok for me suggest the Fidelity offering as one 2% choice. Their cards terms change, I believe the current 2% would go into a brokerage account. A good start though. And yes, $1200 adds fast. It feels like yesterday I was celebrating the $5000 milestone. – JTP - Apologise to Monica Nov 22 '13 at 19:31
  • @TheCleaner Priceline rewards card, 2%. – Loren Pechtel Nov 23 '13 at 23:34
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    @JoeTaxpayer - Is the semester include summer classes? Or are you just talking fall, winter, spring. Having kids of my own you spooked me that 19k is only going to cover fall, winter and spring??? Need to invest more in my MESP 529... – JonH Nov 9 '15 at 19:40
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There are a few potential downsides but they are minor:

  • If you forget to make the payment the interest hit the following month could be significant. With many cards the new charges will be charged interest from the start if the previous payment was late/missed. Just make sure you don't forget to pay the entire bill.

  • If the $5K in monthly bills is a large portion of the credit limit for that credit card you could run into a problem with the grace period. During the three weeks between when the monthly bill closes and the payment is due, new charges will keep rolling in. Plan on needing a credit limit for the card of 2x the monthly bills. Of course you don't have to wait for the due date. Just go online and pay the bill early.

  • If the monthly bills are a significant portion of the total credit limit for all credit cards, it can decrease your credit score because of the high utilization rate.

The good news is that over time the credit card company will increase your credit limit thus reducing the downsides of the last two items.

Also keep in mind you generally can't pay a credit card bill or loan with a credit card, but many of the other bills each month can be handled this way.

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    +1, I'd only add, Utilization is in total. If you have 5 cards with a $50K total credit line, pushing one card to 100% will not kill your score. To your first point, I auto-pay $100 to the 2 cards I use regularly. This way, worse case, a missed payment due to my stupidity or lost bill will result in interest, but not a late fee. – JTP - Apologise to Monica Nov 22 '13 at 19:06
  • added for all credit cards to 3rd bullet – mhoran_psprep Nov 22 '13 at 19:09
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    +1, Do some service providers in the US charge a fee (of 1% to 2%) if you pay their bills by credit card ? If so this may be a downside !! – Victor Nov 22 '13 at 21:17
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    some won't let you pay by credit card, or make it hard to setup the automatic payment, though these tend to be fewer each year. The only ones I found that wanted a fee was the local government for property tax, they wanted more than the cash back amount. – mhoran_psprep Nov 22 '13 at 21:43
  • Why not just use a DD so you can't forget to pay the card off? – Ian Jan 3 '15 at 18:49
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Pitfalls of paying plastic

  • Charges can affect your credit - Credit is based on Debt to Credit. Maxing card each month can affect your score
  • Plastic is easy. Lots of bills plus a new tv and other purchases and you go over limit. Plastic is easier to not notice money being spent.
  • You need to be more diligent - extra charges, surcharges you'd notice if you didn't auto-pay with a credit card, etc.
  • The rewards can change without notice - Changes in reward % can affect a good deal from bad.

That being said, you can also find cards that have better than the 1% it looks like you are getting. I have a card that gives 2% cash back on Gas Stations, Utilities (including stuff like AT&T) and Food Stores (Walmart included).

There are also limited time deals from cards - my fiance's discover has 5% cash back Oct/Nov/Dec on Online purchases.

Make sure to remain diligent, keep your balances low and don't get hit with interest rates or fees (I had HORRIBLE credit and I refused to get a card with an annual fee).

Why pay full price with cash, when you can get 2-5% cash back?

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Some accounts, such as my electric, and payments to the tax collector charge a significant enough fee that is counter productive to use a rewards card. One example of this is Alligent Air. They give you a $6 discount if you pay with a debit card which was about 5% of the ticket price.

Anytime you borrow money, even as well intentioned and thought out as you plan to do so, you are increasing risk. By managing it carefully you can certainly mitigate it. The question becomes, does that time spent in management worth the $600/year?

I did the costco amex deal for about 12 years earning about $300-$400 per year and only once getting hit with a late/finance charge. Despite the success, I opted to end this for a few different reasons. First off people using credit tend to spend more. Secondly, I felt it was not worth my time in management. Thirdly, I did not want the risk.

Despite the boasts of many, the reality is that few people actually pay off their card each month. By your post, it seems to me that you will be one of the rare few. However, if you are expending 5K per month, your income must be above the US national average. Is $600 really worth it?

Perhaps budgeting for Christmas would be a better option.

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    Pete, thanks for your post. For me/us it was based on our Christmas expenses (which we pay cash for as is). I started to realize that I could cut them in half with these rewards. I have a great income, and we don't charge anything as it is now, which made me wonder if a little oversight (basically paying each bill "twice") would work out in the long run. I see your point though that it may be a hassle...I'll just have to see if that's the case long term. Easy enough to just stop doing it. – TheCleaner Nov 25 '13 at 15:40
  • Why if you can pay it off every month would you give up effectively tax free free money? I make about £120 pa and I only spend about £500-600 a month on my credit card (most of it is my train season ticket) – Pepone Nov 10 '15 at 0:45
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There are hidden costs to using rewards cards for everything.

  1. The credit card company charges fees to the merchant every time you make a purchase. These fees are a small amount per transaction, plus a portion of the transaction amount. These fees are higher for rewards cards. (For example, the fees might be 35 cents for a PIN-transaction on a debit card, or 35 cents plus 2 percent for an ordinary credit card or signature transaction on a debit card, or 35 cents plus 3.5 percent on a rewards card.)

  2. After considering all of their expenses, merchant profit margins are often quite small. To make the same amount of profit by serving a rewards-card customer as a cash customer, the merchant needs to sell higher profit-margin items and/or more items to the rewards-card customer.

  3. People who "pay with plastic" tend to spend more than people who "pay with cash". If you pay with a rewards card, will you spend even more?

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