Should you pay bills with a credit card?
Unsure if paying bills with a credit card is smart? Explore the benefits (rewards, cash flow) & drawbacks (interest). Learn how to use credit cards strategically to maximize rewards & avoid debt traps.
There’s nothing like the sweet sensation of freedom that comes from owning your own business and being your own boss. You know, waking up every morning to do what you love and be great at it, not to mention all the checks you get to write when you need to pay your bills.
Wait, are you saying you don’t love writing checks? Well, that’s not a surprise. The usage of paper checks is in steep decline, and people are moving towards other payment methods.
Between 2012 and 2021, the value of check payments in the U.S. dropped from nearly $20 billion to just $11.2 billion. At the same time, credit card transactions rose from just under $27 billion in 2012 to a whopping $51.1 billion by 2021.
As a private consumer, you likely use credit cards for almost every expense, and for good reason. Credit cards have a lot of advantages: they are convenient, universally accepted almost everywhere, and there are plenty of cashback opportunities and other card perks.
Perhaps it’s time you enjoyed the same benefits as a business. If you are asking “Should I pay bills with a credit card,” read on to discover why you should and how Melio can help.
How to pay vendor with credit card
Pay a vendor with a credit card by confirming the vendor accepts card payments, then using a secure payment portal, POS system, or virtual terminal. Some businesses also use third-party platforms like PayPal or Plastiq to route credit card payments to vendors who don’t accept cards directly.
Pay any vendor by credit card with Melio
We’ve got good news for you: there’s no reason for businesses not to take advantage of the benefits of credit cards. Even if you have suppliers who only accept checks or bank transfers, you can start paying most of your business bills with a credit card anyway. How? All you have to do is sign up for an online accounts payable (AP) tool like Melio.
When you set up a payment with Melio, simply choose how you want to pay, as well as how your vendor wants to get paid. If they prefer a check, Melio will mail them one on your behalf, regardless of what payment method you choose.* This means that you pay by credit card, and the vendor receives a check payment. It’s that easy!
Some AP platforms, like Melio, even offer options like a single use virtual card (SUVC), which adds an extra layer of security for vendor payments.
6 reasons to start paying business bills with a credit card today
Now that we’ve solved the most important obstacle of using a credit card for your business bills, let’s explore more reasons why credit card payments could be a great option for you:
#1 Improved cash flow
Maintaining cash flow health is essential for any business to thrive. For many small and medium-sized businesses (SMBs), this requires a delicate dance, balancing paying the bills on time to avoid repercussions and making sure there’s enough money left in the account to cover the rest of the expenses.
Paying with a credit card means your payment is sent to the vendor right away,** while you get to hang onto cash until your next billing cycle. This could mean up to 60 days of additional float to give you some well-needed breathing room. It’s almost like taking a short-term loan without having to apply.
#2 Card perks
Many credit cards offer perks, such as points, cashback, miles, and other card benefits. These add up over time, especially if you have a lot of large expenses. By paying business bills on a credit card instead of by check or bank transfer, you can accumulate these cash-equivalent perks, and get something in return for your regular accounts payable activities.
#3 Convenience for both parties
Paying your vendors, suppliers, and contractors by credit card is easy and hassle-free.
If a vendor does not accept payments by credit card, Melio will solve the problem. With Melio, your business pays by credit card, and nothing has to change for the payment recipient. If checks make more sense for their business, they’ll continue to receive them. Melio handles the logistics, so you don’t have to worry about it, not to mention you no longer need to buy stamps and envelopes or make a trip to the post office.
#4 Safety
A high-quality digital accounts payable platform like Melio is encrypted and layered with state-of-the-art safety protocols. Unlike paying with a check or reading out your credit card details to someone over the phone, using a secure AP platform means your payment won’t get lost or stolen on the way.
#5 Speed
Credit card payments get processed a lot faster than checks or bank transfers. This makes them an excellent option for urgent payments. With Melio, your vendor gets their money by the end of the day,** and you still enjoy a grace period until your next billing cycle, ensuring this oversight doesn’t deplete your cash reserves.
#6 Early bird discounts
Many businesses offer clients a special price if a bill is paid early, or an early payment discount. While that’s a great way to save on expenses, many SMBs don’t have enough cash flow to pay in advance.
Using a credit card to defer the payment by a few weeks could mean collecting these discounts while also improving your relationship with vendors and suppliers, without draining your account.
Tips for effective credit card use in business
Is it better to pay bills with a credit card or bank account? It depends.
Businesses can use credit cards for many types of payments, including equipment and supplies, travel expenses and gas, utilities (electricity, water, internet, cellphone plans), payments for professional services (ie. accountancy or legal fees), maintenance and repairs, and even insurance premiums.
Can you pay an invoice with a credit card? Absolutely yes. Not sure how business credit cards work? In short, they let you separate personal and business expenses, track spending, and access higher credit limits—often with rewards tailored for businesses.
Using a credit card for vendor payments is often preferable, because:
- Credit cards are highly secure and you are not liable for unauthorized charges.
- Credit cards offer various rewards and perks.
- Credit cards reduce the need to manually write checks or handle cash.
- Credit card payments help you build a solid credit rating.
- Credit card payments are cost-effective, as long as the full balance is paid on time and you avoid being charged interest.
- Paying by credit card enables you to delay payment, freeing up available funds and boosting immediate cash flow.
But before switching to card, check the fees involved. Many payees, such as utility companies or subscription providers, prefer credit card payments and won’t increase the charge to cover fees. Other payees may charge extra, or might pass on B2B credit card processing fees, so it is wise to take note so the terms are in your favor. When using Melio, payees receive payment in their preferred form anyway, so the only fee that the transfer incurs is the card fee.
Here are some more business credit card tips for getting the most out of your card usage:
Take advantage of introductory offers: Many card issuers offer incentives to sign up for a credit card, such as sign-up bonuses or 0% APR for a limited time. Leverage these offers to your advantage, but use them wisely. For example, if a sign-up bonus comes with a minimum payment condition, use the card for large purchases to ensure you meet the requirements. You could also use a new credit card to consolidate higher-interest debt at a lower rate, however, be sure to pay off the balances before the higher rates kick in.
Explore rewards and benefits: Choose a credit card that offers rewards, such as cashback, points or miles, or discounts on business-related purchases. Most card companies have business credit cards with perks specifically for businesses, such as extended payment terms, higher credit limits, or travel insurance. These can provide additional and often substantial value for various business needs. Make sure you do thorough research and consider talking to your bank, credit card company, or financial advisor to find the best card for you.
Pay balances in full: Whenever possible, avoid having a credit card balance to prevent interest fees from increasing. The amounts can add up substantially over time. Also, protect your credit rating by paying off your balance in full each month and avoiding late payments. The goal is to keep your credit use to a minimum, so you can avoid debt and reduce the impact on your credit scores.
Automate and schedule payments: With Melio, you can set up automatic payments or schedule reminders so you never miss a due date for invoices. At the same time, track credit card payments closely, especially recurring payments for monthly bills. This way, you can be sure that you have enough funds available to cover expenses and avoid accumulating credit card debt and expensive interest charges. Additionally, you can explore the option of whether or not you can pay taxes with a credit card.
Melio: A solution for both parties
The Melio magic? You can pay with a credit card even when the vendor prefers to get paid another way, including checks (unlike some competitors such as Quickbooks Bill Pay).
Melio is a simple tool, made for small to medium businesses, to handle all aspects of vendor payments digitally.
Melio is built to streamline B2B payments, so you can pay any vendor—whether they prefer checks, ACH, or other methods—without changing your process. You don’t want to go through the trouble of persuading vendors to opt for a credit card payment, especially if they’re not interested in paying credit card fees. They can have it their way, and you can have it your way.
To learn more about Melio visit meliopayments.com
*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.
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