Should you pay your bills with your credit cards?

Credit cards can come in very handy at times. When you are having trouble with your bills, the temptation to pay the bills with your credit cards can become overwhelming. This is especially true when you have companies threatening to cut off your television, heat, water or electricity. However, paying off your bills with credit cards is a path that you don’t want to go down. The reason is that it can lead you to going deeper into debt than you had wanted to.

Here is an example:

If you owe $200 on your telephone bill and the company has stated they will cut you off if you don’t pay, then you may want to use your credit card. So, you pay off the bill with the credit card, thereby putting a $200 charge onto your credit card. Everything may seem good now, but it is not.

The reason is that you have forgotten about the interest, and the interest is always a killer. If you have a 15 percent interest rate on your credit card, then after one month you are going to owe $230 on your credit card. Since you were not able to pay the original $200 on your phone bill, there is the chance you may not be able to pay the $230 on your credit card. As a result, a second month’s interest charge means you now owe $264.50.

By using your credit card and missing one month’s payment, you now owe an extra $64.50. Miss another payment and you owe nearly half of what you originally borrowed.

You should never borrow money off of your credit card to pay a bill, and more importantly, you should never try and get a cash advance off of your credit card so that you can pay off your bills. Cash advances come with incredibly high interest and fees. You can often pay 25 to 30 percent interest, plus fees associated with using the cash advance.

A much better option that is available to you, other than paying for your bills with credit cards and cash advances, is to use the minimum payment system. Minimum payments are what you are required to pay to keep your bill from showing up as past due on your credit report. When you make the effort to pay with minimum payments, you are paying off that little bit, but you are still owing a lot of money. Therefore, it is important to use minimum payments, but you should not rely on them. If you only pay minimum payments on your credit cards, you are only paying off the interest. If you keep using your credit card while paying minimum payments, then you are simply causing yourself to fall farther and farther behind.

If you find you cannot afford to pay your bills, it may be time to scale back. By scaling back on your bills, you can save money and not have to worry so much about being late on your payments. You won’t have to use your credit card to pay bills and you won’t have to worry about collection action. This is by far the best option for you and your bills.

About the Author:

Jennifer B. Baxt, LMHC, LMFT offers online audio/video counseling as well as works with children, individuals, couples, geriatric patients, depression, bipolor, anxiety substance abuse and personality disorders.