Is it worth using credit cards to pay bills when the Merchant/processing fees range from 1.6% to 2.75%?

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Given the points earned on many credit cards is currently being reduced, is it worth using the card to pay a bill when the processing fees range from 1.6% to 2.75% (depending on the card used)? Particularly if we are aiming to earn points at 1.5c or less per point.

Should we just use the cards when there are no processing fees?

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For me, I guess it depends on the total amount I am buying (or even my mood!).

My AMEX card offers betwen 1.5  points per $1 spent. If I am buying something that totals $50, but has a 1.6% surcharge for AMEX, it will cost me $50.80.

I have now have the choice of using my VISA card (only 1 point per $1 spent) earning me 50 points, or using my AMEX card which earn me 76 points (50.80 * 1.5). Thus for an extra 80 cents, I am getting an extra 26 points. For me, I would be going the AMEX.

Now if I am buying something that costs much more (say $1000), with a 2.5% surcharge for AMEX), the situation is this:

  • VISA card – earns me 1000 points for the $1000 spend
  • AMEX card – earns me 1537 points for the $1025 spend ($1025*1.5)

Thus for an extra $25, I get 537 more points. That’s almost 21.5 points per $1 spent (not a bad deal at all). I think it’s more a mental thing – getting your head around the fact you could have paid $1000 instead of $1025. It can be tough to justify!

In summary, I reckon the answer varies from person to person, however for me I am OK with paying a fraction more in return for plenty of points to play with in the future.

  • Assuming you are talking about QFF points then they are valued at roughly between 2-5 cents per point. You need at least 20 points per extra dollar spent just to break even, and it depends on your particular card as to what the earn rate would be but if you do some quick math it should be quite simple. I would say in the majority of cases surcharges above 1.6% are not worth it unless you have a very good point earn rate on that spend.

  • I think 2-5 cents per point is generous on average. I value a QFF at 1 cent, but admittedly have redeemed at a value of 10 cents in the past on First Class redemption vs. online price for the same seat. My rule is that I don’t pay for surcharges. Most businesses allow Visa/MasterCard with a zero fee and I have a 1:1 card so not worth pulling out the Amex for an extra 0.5-2 points. Some businesses charge a credit card fee regardless (e.g. Accor Hotels) and it’s flat regardless of the card so I pull out the Amex. Technically I’d be better paying by cash (or EFTPOS in Australia) but I’ve set up my finances to be credit card dominant. In the example above, the extra $25 gives 537 extra points. That’s costing 4.6 cents per point. For me, it’s just not worth it.

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