Having one credit card that's just for bills can reduce your fraud risk

Having one credit card that's just for bills can reduce the impact and inconvenience that happens if your card or wallet gets stolen.

The first time my wallet was stolen, I had left it in the trunk of my car at a trailhead while I went for a hike. Rookie mistake, I know. By the time I called my credit card issuers to report the theft, more than $400 in fraudulent charges had already piled up.

As it happened, I wasn’t held responsible for those charges. I quickly placed a fraud alert on my credit file and set about the arduous task of changing my account numbers with all the service providers that billed me online.

The second time my wallet was stolen, it disappeared from my house in broad daylight — along with a television, a computer, a checkbook and my childhood coin collection. While the police dusted for fingerprints, I got on the Internet and the phone once again, to tell everyone from the car insurance company to the wireless service provider that my credit card account numbers had changed.

The downside of online bill pay

Having my bills paid automatically online, which had seemed so convenient when I set it up, became incredibly inconvenient after my credit card was stolen. But then I had an idea.

Most of us have more than one credit card anyway. If you already have multiple accounts, it’s the easiest thing in the world to designate one credit card exclusively for automated bill payments.

I now keep that credit card at home — well-hidden and protected by a burglar alarm — and carry a different credit card for daily spending. That way, if my wallet takes a walk without me a third time, I won’t have to change the payment information on my Netflix account yet again.

Of course, the credit card I use for paying my bills might still be compromised, if one of my service providers gets hacked. But keeping at least one card out of my wallet can reduce the risk that the card itself will fall into the wrong hands.

Best practices

Using a credit card to pay regular bills like the cable or electric bill reduces the amount of time you spend on paperwork each month. It’s also nice to earn extra credit card rewards. Some issuers are even starting to offer consumers extra credit card rewards for paying monthly bills.

But consolidating your bills means you’ll get one giant statement at the end of the month instead of a whole lot of little ones. Some people prefer to pay the bills one by one instead of all at once.

Either way, don’t forget to safeguard the credit card you use for paying bills. If your card does get stolen, you won’t have to do as much work to get your finances back on track.

Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email: virginia@nerdwallet.com. Twitter: @vcmcguire. This article first appeared in NerdWallet.