Difference between revisions of "Pay any bill with a credit card"
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{{seo|description=Use Plastiq and other services to pay your mortgage, rent, taxes, loans, childcare, tuition, and other expenses with your credit card (to earn extra rewards).}} | {{seo|description=Use Plastiq and other services to pay your mortgage, rent, taxes, loans, childcare, tuition, and other expenses with your credit card (to earn extra rewards).}} | ||
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| − | A variety of services let you pay bills using a credit card, even when credit cards aren't normally accepted. All these services charge “convenience fees” to cover the cost of the credit card processing fee and earn themselves a small profit. But | + | A variety of services let you pay bills using a credit card, even when credit cards aren't normally accepted. All these services charge “convenience fees” to cover the cost of the credit card processing fee and earn themselves a small profit. But depending upon your circumstances, it can easily be worth paying fees in order to shift more of your spending to your credit cards. |
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| − | <li>'''Finish meeting the initial spending requirement of a new credit card'''. If you find yourself coming up short, you can | + | <li>'''Finish meeting the initial spending requirement of a new credit card'''. If you find yourself coming up short, you can pay a bill from someone who doesn’t normally take credit cards. Examples might be your rent or mortgage, car payment, daycare, etc. Chances are that you have enough expenses to finish meeting your initial spending requirement.</li> |
| − | If the alternative is | + | If the alternative is not qualifying for the signup bonus, paying fees is usually worthwhile. For example, if you are $500 away from meeting the spending requirement, paying a 2.5% fee works out to $10 in convenience charges. This is much smaller than the value of most signup bonuses. |
| − | <li>'''Increase the number of signup bonuses that you can collect each year'''. By shifting most of your expenses, including your rent or mortgage, to your credit cards, you can dramatically increase the total amount you spend on your credit cards each year | + | <li>'''Increase the number of signup bonuses that you can collect each year'''. By shifting most of your expenses, including your rent or mortgage, to your credit cards, you can dramatically increase the total amount you spend on your credit cards each year and therefore the number of signup bonuses you can qualify for. If you are really going to focus your energies on collecting signup bonuses, this can be worthwhile. With a 2.5% fee, it would cost $75 to pay enough of your bills to meet a typical $3,000 spending requirement.</li> |
| − | However, if you pay fees to collect additional signup bonuses now, and then wind up just earning regular rewards for your normal credit card spending later, it isn't worth it. It would be better to simply spread out your credit card signups over time | + | However, if you pay fees to collect additional signup bonuses now, and then wind up just earning regular rewards for your normal credit card spending later, it isn't worth it. It would be better to simply spread out your credit card signups over time and avoid paying extra fees. |
| − | <li>'''Qualify for a special credit card benefit that requires a certain amount of spending'''. Shifting your expenses to your credit cards can help you meet spending requirements that unlock special credit card benefits. For example, the Delta Platinum card gives you 10,000 points and 10,000 Medallion Qualifying Miles, if you spend $25,000 per year. This may be hard to do naturally. However, if you are willing to pay a 2.5% fee, you might be able to shift $25,000 of additional expenses (that you could not normally pay with a credit card) to your Delta card. In the process, you’d be earning an additional 25,000 Delta points from the actual spending. If the 35,000 Delta points and 10,000 Qualifying Miles are worth $625 to you, this would be worthwhile.</li> | + | <li>'''Qualify for a special credit card benefit that requires a certain amount of spending'''. Shifting more of your expenses to your credit cards can help you meet spending requirements that unlock special credit card benefits. For example, the Delta Platinum card gives you 10,000 points and 10,000 Medallion Qualifying Miles, if you spend $25,000 per year. This may be hard to do naturally. However, if you are willing to pay a 2.5% fee, you might be able to shift $25,000 of additional expenses (that you could not normally pay with a credit card) to your Delta card. In the process, you’d be earning an additional 25,000 Delta points from the actual spending. If the 35,000 Delta points and 10,000 Qualifying Miles are worth $625 to you, this would be worthwhile.</li> |
<li>'''Earn extra rewards'''. Some points and miles gamers take this a step further. If it is possible to earn more value in rewards than you’d pay in fees, you are “making” a bit of money on each purchase. For example, if you have a 3% cashback card, and you pay 2% in fees to pay your taxes, you are essentially earning a 1% rebate.</li> | <li>'''Earn extra rewards'''. Some points and miles gamers take this a step further. If it is possible to earn more value in rewards than you’d pay in fees, you are “making” a bit of money on each purchase. For example, if you have a 3% cashback card, and you pay 2% in fees to pay your taxes, you are essentially earning a 1% rebate.</li> | ||
Revision as of 19:30, 26 April 2020
A variety of services let you pay bills using a credit card, even when credit cards aren't normally accepted. All these services charge “convenience fees” to cover the cost of the credit card processing fee and earn themselves a small profit. But depending upon your circumstances, it can easily be worth paying fees in order to shift more of your spending to your credit cards.
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Reasons to pay your bills with your credit card
There are several reasons why it might make sense to pay a fee to use your credit card to pay bills you would otherwise pay with a check or money transfer.
- Finish meeting the initial spending requirement of a new credit card. If you find yourself coming up short, you can pay a bill from someone who doesn’t normally take credit cards. Examples might be your rent or mortgage, car payment, daycare, etc. Chances are that you have enough expenses to finish meeting your initial spending requirement.
- Increase the number of signup bonuses that you can collect each year. By shifting most of your expenses, including your rent or mortgage, to your credit cards, you can dramatically increase the total amount you spend on your credit cards each year and therefore the number of signup bonuses you can qualify for. If you are really going to focus your energies on collecting signup bonuses, this can be worthwhile. With a 2.5% fee, it would cost $75 to pay enough of your bills to meet a typical $3,000 spending requirement.
- Qualify for a special credit card benefit that requires a certain amount of spending. Shifting more of your expenses to your credit cards can help you meet spending requirements that unlock special credit card benefits. For example, the Delta Platinum card gives you 10,000 points and 10,000 Medallion Qualifying Miles, if you spend $25,000 per year. This may be hard to do naturally. However, if you are willing to pay a 2.5% fee, you might be able to shift $25,000 of additional expenses (that you could not normally pay with a credit card) to your Delta card. In the process, you’d be earning an additional 25,000 Delta points from the actual spending. If the 35,000 Delta points and 10,000 Qualifying Miles are worth $625 to you, this would be worthwhile.
- Earn extra rewards. Some points and miles gamers take this a step further. If it is possible to earn more value in rewards than you’d pay in fees, you are “making” a bit of money on each purchase. For example, if you have a 3% cashback card, and you pay 2% in fees to pay your taxes, you are essentially earning a 1% rebate.
If the alternative is not qualifying for the signup bonus, paying fees is usually worthwhile. For example, if you are $500 away from meeting the spending requirement, paying a 2.5% fee works out to $10 in convenience charges. This is much smaller than the value of most signup bonuses.
However, if you pay fees to collect additional signup bonuses now, and then wind up just earning regular rewards for your normal credit card spending later, it isn't worth it. It would be better to simply spread out your credit card signups over time and avoid paying extra fees.
Paying Businesses with Plastiq
Plastiq lets you pay any business. You can use it to pay many different types of bills that you ordinarily couldn't pay with a credit card, like rent, mortgage payments, daycare costs, or housecleaning services.
As of June 1st 2018, Plastiq is having issues with many Visa cards.
- Paying Rent, HOA Fees, Taxes & Government Fees, Utilities, and Tuition now works properly with all Visa cards.
- Visa payments for other categories that are made with Bank of America and Citibank credit cards are treated as cash advances. As a result, the fees and interest charges make it far too expensive to use these cards. Fortunately, Plastiq will give you a friendly warning before you complete any of these transactions.
- With Visa credit card from Chase, the charges for these other categories initially show up as cash advances, but will be automatically converted into=regular purchases later. You won't pay any extra fees, but because they start out as a cash advance, payments will be capped at 20% of your credit limit. This may limit your ability to use Plastiq as you intended.
- Alliant doesn't pay rewards on any Plastiq payments.
- Visa gift cards, and Visas that are small business cards (rather than personal cards) work perfectly for all categories that Visa allows (see below)
- Payments with Capital One Visas are temporarily suspended.
It is not clear if Plastiq and Visa will ever fully resolve these issues.
- Plastiq is the most flexible bill paying service. It lets you pay almost any bill with a credit card. If the company isn’t already in their database, they will simply mail them a check or send them an ACH transfer. You can even use it to pay individuals, such as babysitters, as long as you are paying for an actual item or service, and not just sending them money as a gift. One of the only other restrictions is that you can’t use it to send money to financial accounts, including paying off your credit card bills.
- Mortgage payments can only be made with Mastercards and Discover cards. Rent can be paid with all cards. This situation has been in flux, so if you want to make a mortgage payment with a Visa card, you might do a quick online search to see if it is possible again.
- You can only use Amex cards for a limited set of payments. The only acceptable payments are for "Government, Utilities, Education (not including student loans), Residential Rent, and Club Fees & Memberships".
- Service fees are typically 2.5%, but they often have promotions, which can reduce the cost with certain types of cards. Plastiq is not particularly useful for liquidating gift cards, because they charge the full credit card fee, even if you are using a debit-based gift card.
- There are currently no cards that earn bonus rewards on Plastiq purchases. You used to be able to earn 3x points with the Chase Ink Preferred card. Even though the payments are online, you won't earn bonus points with the AT&T Access cards.
One small gotcha. If you use the service to pay someone who isn't in their database, certain Visa cards might code this as a cash advance, instead of a purchase. You don’t want this, as you’ll need to pay extra interest and fees, and it won’t count against your initial spending requirement. But when this would be the case, Plastiq will warn you, and you can shift to another card or make the payment in some other way—so there is no need to worry.
Person to Person payments
Services, like PayPal and Venmo, let you use your credit card to send money to anyone, and not just to pay a bill.
They do, however, require that the recipient also have a PayPal or Venmo account. You can always use these services to send money to your spouse or a close friend. Convenience fees are around 3%.
If you use these services just to shuttle money back and forth between people, you will eventually get shut down, However, you should be fine, as long as you primarily send money to people you actually owe money to. If you just want to shuffle money, have the recipient pay you back through an alternative channel, and not through the same service. Depending on your volume, you might not raise any flags.
These services are generally geared towards making smaller payments. If you use them to repeatedly make large payments, you will get shut down. For example, Venmo has an explicit limit of $2999/week, and only $299/week if you are just getting started.
Finally, Amex doesn't pay out reward points for these services.
Paying Taxes
- You can pay your federal taxes with a credit card, and depending on your state and county, you can also pay your state taxes and property taxes. Convenience fees are around 2%. When this was written, the lowest fee for federal taxes was 1.87%. These fees are cheaper than Plastiq. IRS Credit Card Payment webpage.
- Another alternative is to use your credit card to purchase (pin-enabled) Visa or Mastercard gift cards, and then use the gift cards to pay your taxes. The fees the tax payment companies will charge for using a debit card are very low, but there are additional fees to activate the gift cards. This approach doesn’t save you much money, but it can let you defer making your tax payment until a later date. You might even earn a better reward rate, if you can purchase the gift cards at a store that earns bonus rewards. The only limitation is that you are typically limited to two payments with each tax paying service for each tax payment time-period. Since gift cards usually have a $500 maximum, this limits the total amount of taxes that you can pay with this method. You may be able to bypass the two card restriction by calling in. The Frequent miler article below says this is possible with OfficialPayments.
- You can take advantage of any PayPal-related promotion by paying your taxes with PayUSATax. Occasionally, some credit cards will offer bonus rewards for PayPal purchases, and paying your taxes is a great way to multiply the benefits of this type of promotion.
Pay off your student loans or save for college
If you have student loans, you can purchase “Gift of College” gift cards and then use those cards to pay off your loans. Before you do, you need to go to their website, register for an account, and see if your student loan company is listed. The same cards can be used to add funds to any 529 account to put aside money for your kids’ education.
This can be a cheaper than paying them with Plastiq. The fee for a $500 gift card is only around 1.2%, but they aren't available in many stores. If you need to purchase online, you can only get cards up to $200 each, with a fee of about 3%.
