When Beverly Harzog's dog needed surgery in August, she paid the $1,086 veterinary bill with her rewards credit card.
"I figured I might as well get a little bit back on it," says Harzog, a credit card expert, author and consumer advocate from Atlanta. A little she did - 1 percent cash back for $10.86.
Harzog advocates paying for your purchases and recurring bills with your credit cards whenever possible to reap the rewards.
But her credit card advice comes with a huge caveat: Pay your bills with credit cards only if you pay your balance off in full each statement. "If you pay interest on your balance, you don't make money even with the rewards you can earn," she says.
Personal finance columnist Liz Pulliam Weston of Los Angeles couldn't agree more: "Paying your bills with plastic is a good strategy but only if you pay your credit card bills off in full each and every month. Otherwise, you're paying unnecessary interest, and that's just dumb."
Thanks to technology, these days you can pretty much buy or pay for anything with credit cards, except perhaps for a house. Most mortgage lenders won't let you make your monthly payments with a credit card because they don't want to pay merchant fees. Most brokerage firms don't let you buy stocks with credit cards either, even online brokers. They want your real money - skin in the game so to speak.
Still, you can charge everything from your monthly electric and mobile phone bills to your groceries and back-to-school shopping. Put it on a credit card and you can pile up some great rewards along the way.
Credit card issuers like when you use their cards to pay your bills because they earn merchant fees, Weston says.
In addition to accumulating rewards, here's why you might want to use plastic rather than cash at the register and for recurring bills:
And here's why you might want to be cautious about paying all your bills with credit cards:
Thanks to the recent settlement in the government's antitrust lawsuit against Visa and MasterCard, retailers can charge higher prices to customers who pay with their credit cards.
It's not yet clear what impact, if any, the surcharges will have on credit card usage and rewards points.
The settlement requires credit card issuers to temporarily reduce the swipe or interchange fees they charge merchants for processing credit card transactions. Credit card issuers also can negotiate collectively over future interchange fees.
Weston sees two possible scenarios as a result: Credit card issuers make their reward credit card offers less generous to make up for their loss of interchange fees. Or credit card issuers try to improve their credit card rewards programs to prevent people from switching to other payment methods because of the surcharges for using them. Weston says it's too early to tell which is more likely.