In my recent post about credit card shopping, I mentioned that I found a card (US Bank Cash+) that had a better rewards program than the card we had been using (Chase Freedom). One of the nice features of this card is that you can choose the categories on which you earn your 5% cash back. One of the categories is monthly utility and service bills, which brings me to today’s post.
How Do You Pay Your Bills?
There are countless ways of paying your monthly bills. Some people prefer the classic method of writing a check and sending their payment through the mail. Some people use the online banking features at their bank to set up bill payments. Some people go to websites of the billing companies (AT&T, Allstate, Comcast, etc) each month and schedule their payment via their bank account or by credit card. Some people even have all their monthly bills set to pay automatically each month.
Historically, I’ve been one to go to each company’s website each month and schedule my payment to pull from my checking account. I’ve always felt comfortable with this. I work at a bank that offers a billpay service through our online banking, and I’ve been told my many of my co-workers to try it out. But, I’ve never gone through with it. I’m good with the way I’ve been paying. I’ve never had a late payment, and the act of going to each website kind of serves as a reminder to me to do it.
Changing Things Up
However, now that we have our new credit card that pays 5% cash back on monthly utility and service bills, I am going to change things up:
First of all, I am no longer going to schedule my bill payments to come from my checking account. Instead, I am going to put them to my credit card. This has a major benefit: the 5% cash back I’ll earn on my credit card. My $150 monthly AT&T bill will earn me $7.50 in rewards. In fact, I calculated that by paying all my monthly utility and service bills with my credit card, I’ll earn close to $25 a month in rewards. I know this isn’t a ton, but that adds up to $300 a year.
Secondly, I’m going to really streamline things and set my monthly payments to post automatically each month to my credit card. No more logging on to a bunch of different websites each month to schedule payments. This really doesn’t have financial implications, but it should lead to significant time savings. Granted, I’ll still need to review my bill statements to make sure I don’t miss any weird charges that may appear, but that doesn’t take very long.
There are some additional factors to consider. Just like with any credit card rewards, it’s only worth it if you pay the balance off in full each month. Otherwise the interest you pay will offset any rewards earned. Also, it’s important to keep track of what you’re putting on your card. I think the trap that some people fall into is that they start putting their bills on their credit card, then they see that their checking account balance is pretty high (because their monthly bills are on the card), and they spend the money that’s in their checking account. So, when they get their credit card statement and see the large amount, they’ve already spent the money they would have used to pay for their bills.
One way around this is to simply schedule multiple payments to your credit card each month instead of just waiting until your monthly statement arrives. I’ve read about people doing this. For example, I receive my monthly AT&T bill for $150, due on the 25th of the month. I know that on that day, $150 will be charged to my credit card to pay the bill. What I can do is schedule a $150 payment from my checking account to my credit card for the same day. This way I still earn the 5% cash back by putting the bill on my credit card, but I won’t be tempted to spend the $150 before the credit card bill comes due.
Do you have any tips or tricks for paying your monthly bills? Please share in the comments…