Editorial Policy

6 Expenses You Might Not Want to Charge

Allie Johnson

May 23, 2013

You just got a new rewards card and you're envisioning all the points you'll rack up by paying for big bills and purchases. Not so fast.

Some merchants, lenders and service providers still either don't let you pay with a card, or charge a hefty credit card fee that can wipe out your rewards. Here are six things you might not be able to pay for easily with a credit card, plus one trick to (sort of) beat the system:

1. Your digs – Whether you rent or own, you'll probably have a hard time paying for your housing with credit. Most mortgage companies and landlords don't take cards.

“They don't want to get dinged with fees,” says Eric Rosen, managing editor of rewards website ThePointsGuy.com, referring to credit card processing fee of up to 3 percent or more that sellers pay when a customer buys something on credit.

If you're in the market for a new mortgage, it can't hurt to ask a company if you could pay your mortgage with a card.

“You should be shopping around anyway,” Rosen says. “Ask what they're willing to do for you.”

2. Your utility bills – You probably can pay your gas, electric or water bill with a credit card. But many utility companies use third-party automated payment services that charge fees big enough to cancel out your rewards. For example, Con Edison power company in New York uses a company that charges a $4.75 fee to pay by credit card. Georgia Power uses a company that charges $3.60. Unless you have a truly massive bill, it's probably not worth it to use your rewards card. Say you have a $100 bill, and you get a standard 1 percent cash back. You'd be paying at least $3 to get $1 in rewards. But not all companies charge: NW Natural gas company in Oregon, for example, offers free payments by credit card, advertising that customers can earn points.

3. Higher education – It's not as easy as it used to be to pay for college tuition with a credit card, Rosen says. Some schools have stopped accepting cards, and others charge fees to process payments with plastic. However, some colleges and universities still take cards without an added charge.

If you already have a student loan, don't count on paying it off all at once with a card: Some lenders don't accept plastic, and others limit the amount you can pay with a card. The largest U.S. student lender, Sallie Mae, imposes limits on credit card payments.

“To help customers avoid swapping what is usually low-interest student loan debt for higher-interest credit card debt, we limit credit card payments to the monthly amount due rather than the pay-off amount,” says Debby Hohler, Sallie Mae's director of corporate communications.

4. A new car – You've saved up to buy a new car, but you'd like to put the purchase through your credit card to get points. You imagine driving your new Lexus to the airport to catch the flight to Paris that you earned with all those points. It might not be that easy.  Most car dealerships limit the amount you can put on credit cards to $5,000, Rosen says. One ThePointsGuy.com forum member reported that he was able to put $10,000 of the price of a new car on a credit card by making two payments on different dates. His advice: Negotiate the price first so the dealer doesn't figure in credit card processing costs and inflate the price of the car.

5. A gambling spree – If you're planning a hedonistic weekend in Vegas, keep your credit card in your wallet. If you can use your credit card to buy gambling chips at a casino, the transaction typically will be processed as a cash advance. On cash advances, unlike purchases, interest starts accruing immediately, says Greg Meyer, communications manager for Meriwest Credit Union. Plus, the cash advance interest rate usually is higher than the purchase APR, Meyer says. You'll probably be charged a cash advance fee of about 2 percent, too.

“If I'm taking out $1,000, they will charge me $20 right off the bat,” Meyer says. The kicker: some rewards programs don't even give you points for cash advances, he says.

6. A tax bill – Do you owe Uncle Sam? You can pay your tab with a rewards card, but all the companies that process these payments charge “convenience fees” that range from 1.88 percent to 2.35 percent.

“The convenience fee they're charging is really convenient for them, but not for the consumer,” Meyer says. “It does negate any rewards.”

A possible workaround
So, why can't you pay for these items freely and easily with a credit card? It usually comes down to one big reason: The businesses don't want to get stuck with hefty credit card processing fees on large payments, Rosen says. For example, if you pay a $1,000 mortgage payment with a credit card, your mortgage lender could end up paying $30 or $40 to the credit card company. Some companies also claim they're trying to help keep you out of credit card debt. Is that true?

“Very few companies are altruistic,” Rosen says with a laugh.

Now for the good news: If you're determined and willing to do some legwork, there is a workaround. Rosen says. You can get a prepaid card — he recommends the American Express Bluebird, which acts like a debit card and checking account. You can load money onto the card with Vanilla Reloads.

The trick is to find a store that allows you to buy Vanilla Reloads packs with a points-earning credit card. Some CVS locations allow you to use a credit card for the purchase, but you'll have to check to make sure, as some stopped accepting credit cards for reloading purchases. The packs are available at $500 value, and cost $3.95 each. Some stores impose limits on the dollar amount of Vanilla Reloads you can buy each day. And you can only use $5,000 worth of Vanilla Reloads per month.

Once the money is in your account, you can send a check or electronic payment, Rosen says.

Rosen says he uses this method to pay his rent, writing a check from his Bluebird account.

“It's a very useful tool to rack up points on transactions you wouldn't be able to otherwise,” he says.