How To Pay Utility Bills With A Credit Card: A Complete Guide

Paying utility bills with a credit card can be a great way to earn rewards get sign-up bonuses build your credit, and consolidate spending. However, it also comes with some risks and fees to watch out for. This complete guide will walk you through the pros and cons so you can decide if paying utilities with credit is right for your situation.

Benefits Of Paying Utility Bills With A Credit Card

Some of the best reasons to use a credit card to pay for your bills are listed below:

• Earn rewards Many credit cards offer 1-5% cashback or points on all purchases. This allows you to earn rewards on utility bills you have to pay anyway. Over the course of a year, this can add up to hundreds of dollars in rewards

• Sign-up bonuses Opening a new credit card with a sign-up bonus can score you $100-500 or more in cashback or travel rewards This effectively gives you a discount on your utilities

• To improve your credit, use credit cards responsibly and pay your bill in full every month. This will help you build your credit history. Good credit saves you money on interest rates.

• Consolidate spending: Instead of tracking payments across multiple utility company accounts, everything is in one place on your credit card statement.

• Buyer protections: Credit cards offer extended warranties, return protections, fraud liability protections, and other benefits you don’t get with other forms of payment.

• Delay payment: Credit cards give you a grace period before interest accrues, allowing you to delay payment by up to a month (as long as you pay in full).

Risks & Fees To Watch Out For

While the benefits can be significant, there are some potential downsides to watch out for:

• Interest charges: If you carry a balance and don’t pay off your credit card in full, the high interest rates can eclipse any rewards earned.

• Annual fees: Some rewards cards charge an annual fee, which can range from $50-500+. Factor this into your cost/benefit analysis.

• Convenience fees: Many utility providers charge an extra fee for credit card payments, usually 2-5%. This can wipe out any rewards earned.

• Credit limit impact: Utilities can be expensive, so charging them monthly can significantly reduce your available credit on that card. This has a small negative effect on your credit scores.

• Personal finance habits: Relying on credit cards can lead some people to overspend. Make sure you have the discipline to pay off the balance each month.

To avoid fees, only use a credit card with utility providers that directly accept credit cards with no processing charges. You’ll typically pay fees if you need to use a third party payment processor.

How To Pay Utility Bills With A Credit Card

Follow these steps to start paying your utilities with a credit card:

1. Call your utility providers and ask if they accept credit card payments directly with no processing fees. Electric, gas, water, internet, cell phone, and garbage collection are common utilities you may be able to charge.

2. If they accept credit cards, provide them with your card details to link to your account. Make sure there are no restrictions on which card brands they accept.

3. Opt into autopay so the bill is automatically charged to your card each month. Just make sure you have the funds to pay it off.

4. If the utility provider doesn’t directly accept credit cards, ask them for recommended third party processors. Companies like Plastiq and Paymentus allow you to pay with credit for a 2.5% processing fee.

5. Compare your potential rewards earnings or sign-up bonus value versus the processing fee. Only use a processor if you come out ahead.

6. To avoid credit limit issues, consider dedicating a single card just for utility payments. Choose one with no annual fee and a high enough limit to cover your monthly bills.

Best Credit Cards For Utility Payments

Here are some of the best credit cards to use when paying utility bills:

• Chase Freedom Unlimited – 1.5% cashback on all purchases. No annual fee.

• Citi Double Cash – 2% cashback on all purchases (1% when you buy, 1% when you pay it off). No annual fee.

• Amex Blue Cash Preferred – 6% cashback on up to $6,000 per year in grocery and gas purchases (includes utility providers). $95 annual fee.

• Bank of America Customized Cash Rewards – 3% cashback category you can set to a frequent utility payment like internet or cell phones. No annual fee.

• Capital One SavorOne Rewards – 3% cashback on groceries, dining, entertainment; 1% on other purchases. No annual fee.

• U.S. Bank Altitude Connect – 4% cashback on gas and electric utilities, 2% on streaming services, 1% other. No annual fee.

Check your options for the best fit based on your utility providers, spending patterns, and rewards preferences.

Alternatives To Credit Cards

While credit cards have advantages, they aren’t your only option:

• Debit card: Debit pulls from your checking account directly but doesn’t help build credit or offer rewards.

• Bank account: You may be able to pay directly from your bank account with no fees using your checking account and routing number.

• Cash/check: Paying by check or cash avoids credit card fees, interest, and debt. But you lose out on buyer protections, rewards, and convenience.

• Money order: Getting a money order made out to the utility company is another way to pay without a credit card.

• Prepaid debit card: Utilities accept branded prepaid debit cards like Visa or Mastercard. You lose some rewards compared to credit cards but avoid overspending risks.

• Bill pay service: Your bank may offer a free bill pay service to mail checks to companies. This automates payments without using credit.

Tips For Managing Utility Payments

• Set up autopay to avoid late fees but be sure you have the funds available to pay the charges in full each month.

• Check statements for rate hikes annually and call providers to negotiate better deals. Being a loyal long-term customer can get fees waived.

• Save on energy costs by using less electricity, water, and gas. Unplug devices, turn down the thermostat, replace light bulbs with LEDs, and take shorter showers.

• Bundle your internet, cable, and cellphone with the same provider for discounts.

• Compare plans and rates from competitors annually to find cheaper service providers. You can often save money by switching companies.

The Bottom Line

Paying utility bills with a rewards credit card can be a clever way to save money or earn cash back if you do it responsibly. Just be cautious of interest charges and convenience fees that could outweigh the benefits. Consider your personal financial habits and credit limit before relying on credit cards. But used wisely, charging utilities can provide a nice monthly boost to your rewards earnings.