October 23, 2024
• 3 Minute Read
Paying your bills is part of adulting, but did you know it can also be an opportunity to build your credit score? On this edition of Wise Spend Wednesday, CreditSoup talks about paying certain bills with a credit card. You can strengthen your financial profile and increase your credit score. Let's break down how this works and why it’s a smart move for your credit health.
How Paying Bills with a Credit Card Helps Build Credit
When you use a credit card to pay bills like your cell phone, utilities, or streaming services, the key to building credit comes from consistent and responsible usage. Here's how:
1. Timely Payments Are Key:
One of the largest factors in your credit score is your payment history. Paying your credit card bill on time each month not only keeps you in good standing with the issuer but also shows that you’re responsible with credit. Each on-time payment is reported to the credit bureaus, which positively impacts your credit score.
2. Increases Credit Utilization Ratio:
By spreading out your expenses and using your card regularly for bills, you may improve your credit utilization ratio—the amount of credit you’re using compared to your total available credit. Ideally, you want to keep your credit utilization under 30%. Paying bills with your card gives you an opportunity to use credit wisely while keeping your balance manageable.
3. Builds Credit History:
Creditors like to see a long history of responsible credit use. When you pay bills with your credit card and consistently pay off the balance, you’re building a solid credit history. Over time, this can raise your credit score and make you more attractive to lenders.
4. Earn Rewards and Perks While Building Credit:
Some credit cards offer rewards like cash back, points, or travel miles for everyday purchases, including bill payments. This means you can build credit and get rewarded for it, making this a win-win situation. Just be sure to avoid carrying a balance, so interest charges don’t outweigh the perks.
- Credit Recommended:
- Average/Fair/Limited/Good/Excellent
- Intro (Purchases)
- See website for Details*
- Intro (Transfers)
- See website for Details*
- Regular APR
- See website for Details*
- Annual Fee
- See website for Details*
- Credit Recommended
- Average/Fair/Limited/Good/Excellent
- Intro Rate
- See website for Details*
Highlights
- Earn up to 3% cash back on all purchases
- Redeem cash back in the form of checks, statement credits, gift cards, merchandise or towards free travel
- Earn sign-up bonuses after meeting initial spending thresholds
- Terms vary by partner offer. Please see each bank's application for terms and conditions.
- Clicking will take you to CreditSoup.com to compare Cash Back Credit Cards from participating partners
Things to Watch Out For
While paying bills with a credit card can help build credit, there are a few things to keep in mind:
•Fees: Some billers may charge a convenience fee for credit card payments. Check with each service provider to avoid unnecessary costs.
•Pay in Full: THIS ONE IS IMPORTANT. To avoid interest charges, aim to pay off your credit card balance in full each month. Carrying a balance can lead to high interest fees, which can quickly erase any credit-building benefits. Make sure to pay off the charges before the billing statement hits.
In Summary, Use Your Credit Cards Wisely
By using your credit card to pay recurring bills and managing your balance wisely, you can give your credit score a steady boost. It’s a simple way to take control of your financial future while making payments you’d already be making anyway.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.