Banking can be a headache, particularly when you use a traditional bank. Between trekking to bank branches, earning little to no interest on your cash, and paying annoying fees, you might find yourself tempted to say goodbye to your bank and pick a new one. At the same time, you probably worry about the time and effort it will take to move your banking services somewhere else. Switching banks can feel especially daunting if you have a lot of bill pay transactions set up through your bank account that you’ll have to move over one by one.
But there’s a trick you can use to make switching banks much easier: pay all of your bills with a credit card.
Pay your bills with a credit card
First things first: credit card debt typically comes with an extremely high interest rate (nearly 15% for new cards right now), so if you’re going to use one, it’s important for you to pay off your entire balance each month. If you’re confident you’ll be able to do this, however, credit cards provide benefits that make it worth your while to use them for all of your bills.
Much has been written about the benefits of using credit cards, ranging from security to building credit history. But for the purposes of this post, we’ll focus on the two main reasons to pay your bills with a credit card instead of right out of your bank account. The first reason is rewards: you’ll earn points or cash back (or whatever your credit card offers) for using your card to pay your bills, which can translate to a 1-2% discount on all of your spending. You won’t get those rewards for spending right out of your bank account. If you’re going to pay the bill anyway, you might as well earn rewards. The second reason is portability: by putting all of your recurring bills on your credit card instead of linking them to your bank account, you make it radically easier to switch financial institutions because you’ll have far fewer bill pay transactions to update.
The problem with credit card reviews
So what’s the best credit card to use for your bills? Unfortunately, popular credit card review sites make it hard to tell. If you visit these sites, you’re likely to find long lists of cards and their respective benefits, but it will be hard to pick a clear winner. This isn’t an accident. Reviews sites are often compensated by credit card companies to feature certain cards, which means they have a strong incentive to promote multiple cards instead of recommending one or two as the best.
To pick the best card for your needs, do your own research. We recommend making a grid that tracks these three factors for each card: the APR (or interest rate you’ll pay on any outstanding balance), the annual fee, and the rewards you’ll receive. You’ll need to decide which rewards are most valuable to you (travel? cash back?), evaluate the likelihood that you’ll carry a balance and owe interest, and weigh whether the benefits you’ll get are worth the annual fee you’ll pay.
Once you’ve chosen a credit card and put your recurring bills on that card, switching banks is easy. You’ll probably have a few bills you can’t put on your credit card: your mortgage or rent, your utilities, and your credit card bill itself. But moving three bill pay transactions over to a new account is a piece of cake compared to moving over a dozen or more.
In addition to updating your bill pay when you switch banks, there are a few more items you should move: your direct deposit, any “auto-save” rules you have set up in your old account, and any direct bank links to services like Venmo and Paypal. You’ll also want to consider the long tail of places where you might have linked your bank account, like brokerage accounts and your company’s expense reporting software. Just make sure you’ll have enough money in your account to pay any upcoming transactions while you’re making the switch. Compared to the hassle of updating an endless list of bill pay transactions, these items shouldn’t take much time at all.
A new way to bank
Using a credit card to pay your bills dramatically simplifies the process of switching banks. And if you’re tired of feeling like your bank is making money off of you (and to be clear, they are) you might consider using Wealthfront instead.
Wealthfront’s Cash Account has a full suite of checking features, pays an APY many times the national average, and charges absolutely no account fees. We also make it easy to send paper checks (for things like your rent or mortgage) on a recurring basis up to a year in advance. With the Cash Account, you can get paid up to two days early with direct deposit, pay bills and friends, and deposit checks right from the app. And it’s integrated with our best-in-class investing service which allows you to build long-term wealth with an investment strategy that’s time-tested and academically proven. You can even use our free service Autopilot to automate smart transfers to your Investment Account.
At Wealthfront, our mission is to build a financial system that favors people, not institutions. To accomplish that mission, we’re reinventing banking to provide a much better experience than what you’d get at a traditional bank. We’re thrilled to offer all the features you need for your day-to-day banking needs. We’re confident we can offer you much more value than your traditional bank can.
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Checking features for the Cash Account are subject to identity verification by Green Dot Bank. Green Dot Bank operates under the following registered trade names: GoBank, Green Dot Bank and Bonneville Bank. All of these registered trade names are used by, and refer to, a single FDIC-insured bank, Green Dot Bank. Deposits under any of these trade names are deposits with Green Dot Bank and are aggregated for deposit insurance coverage. Wealthfront products and services are not provided by Green Dot Bank. Green Dot is a registered trademark of Green Dot Corporation. ©2020 Green Dot Corporation. All rights reserved.
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About the author(s)
The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives. View all posts by The Wealthfront Team