Financial Tips | Debt Management

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How to Profit by Using Credit Cards to Pay Bills

You pay your bills month after month. Your either write a check and mail the payment, or (if your are technologically savvy) you make the payment online using your bank’s bill pay service. Paying bills with cash can actually cost you more money than just the cost of the bills. As you pay bills, your checking account balance is gradually reduced. Therefore, if you have an interest bearing account, you are losing the interest on those dollars. However, there is a solution that could not only take away this disadvantage, but could possibly reward you in three ways. The solution is to pay your bills with your credit card.

I know what you are thinking, “Why would I pay with a credit card? A credit card must also be paid, so what is the point?” The point is that you could be rewarded for paying things with your credit card. First, if you have a rewards card, you will earn points for the amount you charge. Rewards points are redeemable for cash, airline travel, and other merchandise.

Second, by the continuous use and timely payment of your credit card, you will be building a strong credit report and thus, building a strong credit score. A good credit score will save you tons of money in interest and will help you get approved for loans.

Last, you do not lose as much interest from your interest bearing account (assuming you have one) because the money stays in your account longer. Additionally, when you do pay your credit card, only that one sum comes out at that one time. Therefore, you do not gradually decrease your checking account. Additionally, paying the bills in a lump payment (by using your credit card and then paying off your credit card) will help you get an accurate number on your monthly expenses.

It is important to note that in order for you to realize these benefits, you must pay off your credit card balance in full every month. If you do not pay off the bill in full, you will incur interest and the whole reason to use the credit cards (to get the interest free benefits of reward points, a strong credit report and credit score, and more interest from your interest bearing account) will be frustrated.

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