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Many of my readers are probably wondering if this is a late April Fools joke, but it's not. I do think credit cards are good for some things, and one of the best things I've found to use them for is automatically paying bills with.

More and more credit cards are allowing you to pay OTHER credit cards, without accruing a cash-advance fee. Notably Bank of America's American Express cards allow you to do this.

The Setup

Since automating your finances is one of my favorite financial advisories, this counter-intuitive action (using your credit cards MORE) actually helps you manage your finances better. Here's what you need.

1. A credit card that allows you to pay bills/utilities from their web site.
2. A credit card with the lowest interest rate you can find, that still fulfills #1
3. A bank account with on-line banking

Now you can plan your strategy.

The Flow

The idea is to pay all your monthly bills with the credit card, then make one BIG payment (that covers those monthly bills at the end of the month). What this gains you is the guarantee that nothing gets paid late (if you set them up to be paid electronically) and you can get some additional time to pay the bills if one paycheck doesn't have enough money to cover the entire amount. As long as you pay off the balance by the next month, there shouldn't even be any interest accrued.

Bills In - Recurring utilities and standing bills (car, mortgage, and other credit cards) can be set up to be auto-paid on a particular day of the month, so you never forget them. And even if you don't have the money available RIGHT THEN, they get paid, and you avoid a late-fee charge.

Money In - At the end of the month, or whenever you get paid, you can pay down/off the amount on the card holding the bills. You can do this automatically, with a auto-pay from your bank, or manually, when you get the bill.

The Benefits

Of course, there's the obvious benefit of automating your payments. There's also a 'float period' that you get from moving one payment along this 'chain'. Up to about a month and a half before you actually pay the amount due. It doesn't sound like much, but since you get this float effectively free, there's no real reason not to take advantage of it.

Finally, if you use a credit card that gives you points or cash-back, you want to run as much of your normal finances through it as you can to accrue the benefits. You're going to have to pay these bills anyway, no reason not to get a little extra for the effort.

Many people get uncomfortable about using credit cards to pay other credit cards, but once you get over that mindset, you can game the system in your favor. It's even better for the credit card companies, as they get a percentage from the companies you're paying with their card.

What do you think of this credit card trick? Let us know in a comment if you like it or don't like it.

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