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You might want to make the most of your points on a rewards credit card and look for ways to accrue more rewards. However, you also want to refrain from accruing credit card debt.
Utilizing your card for regular expenses that you must pay for regardless of the time, like your utility bills, is an excellent method to earn valuable rewards without building up a large balance. Annually, the average single-family home spends close to $4,000 on utilities. Those costs may enable you to earn rewards with a good credit card, which you can then redeem for statement credits or free travel.
However, is it always a good idea? Here are some things to consider before using a credit card to pay your utility bills. In this article.
What Utilities Can You Pay With a Credit Card?
Your utility provider may have different payment options, but generally speaking, credit cards can be used to pay the following utility bills:
- Phone or cellphone bill
- Internet bill
- Cable bill
- Water bill
- Electric bill
- Gas bill
Pros and Cons of Paying Utility Bills With a Credit Card
Consider the benefits and drawbacks before using a credit card to pay for utility bills.
Pros of Paying Utilities With a Credit Card
- You could earn credit card rewards. When you pay your utility bills with a credit card that offers rewards, you can accrue additional benefits like cash back, points, or miles.
- You might benefit from purchase protection. Certain credit cards offer purchase protection for goods you use the card to pay for, though not all of them do. If you pay your bills with a particular card, you might be eligible for protection against theft or damage to your cellphone, for example.
- It can help you qualify for a welcome bonus. Certain credit cards offer new users an introductory or welcome bonus if they spend a specific amount of money soon after opening the account. Paying your utility bill with one of these cards could cause you to spend more than you need to in order to qualify for the bonus.
- It ensures your payments go through. Make sure your checking account has enough money in it on the due date before setting up automatic bill payments from your checking account. Your payment might not be processed if your account balance fluctuates and you neglect to check it before a bill is due. That could entail an overdraft fee from your bank, late fees from the utility company, or a service interruption. You can have confidence that your automatic payments will be made on time if you use a credit card for them.
- It can simplify disputing charges. Using a credit card to pay for any dubious charges that may show up on your utility bill can help you get your money back. You are not required to pay the contested amount or any interest that has accrued until the credit card charge dispute has been reviewed. However, if you used a checking account to make the automated payment, you won’t receive your money back until the review is finished.
- It could help boost your credit score. If credit is new to you, paying your bills on time will help you establish a good credit history. You can show that you use credit responsibly by paying for small purchases like streaming services on a regular basis with a credit card or by keeping an active credit card that you no longer use for daily purchases.
Cons of Paying Utilities With a Credit Card
- There may be a convenience fee. Some utility companies charge a convenience fee if you use a credit card to pay your bill. Despite the small amount of the fee, you will have to pay it each month, which builds up over the course of the year. These convenience fees frequently add up to more than the credit card rewards you can receive for making bill payments. Be sure to carefully consider the potential rewards against any fees before choosing to pay with a credit card in order to accrue rewards. Conversely, if you pay your utility bills straight from your checking account, some companies will give you a discount. Ask if yours does.
- Your credit score could suffer. It’s possible that paying utility bills with a credit card could cause your credit utilization ratio to rise too high, depending on your utility charges, how many utilities you pay with the same card, and your credit limit. Utilizing more than 0% of your available credit for revolving loans can have a negative impact on your credit score. In the event that, for instance, you have a credit card with a $1,000 limit and pay $400 in utility bills each month, you are utilizing 0% of the credit that is available to you. Estimate your monthly utility bills and, if needed, split them across several credit cards to avoid piling too much debt on any one card in order to reduce this risk.
- You could end up paying interest. When you pay your utility bills with a credit card and don’t pay the entire balance when it’s due, interest will start to accrue on your balance. Credit card interest is generally compounded daily. With the annual percentage rates (APRs) on credit cards currently topping 2020 percent, interest can quickly snowball and make it more difficult to pay off your balance.
How to Pay Utilities With a Credit Card
Usually, you can set up automatic payments for your utility bills by calling the company or by visiting the website of the utility provider. Certain providers allow credit card payments to be made directly, while others need you to use a third-party processor like Plastiq.
Generally, third-party businesses charge fees; these could be additional to what the utility company charges. Prior to enabling automatic credit card payments, ensure that you are aware of all associated costs.
How On-Time Utility Payments Can Improve Your Credit
Your utility providers do not report your payments to Equifax, TransUnion, and Experian, the three major credit bureaus. Utility payments therefore usually don’t improve or lower your credit score. (There is one exception: Your debt will appear on your credit report and may affect your credit score if your payments are so late that it is charged off or sent to collections.) ).
On the other hand, there is a method to use timely utility payments to raise your credit score. Adding utility accounts to your Experian credit report can potentially improve your credit score through the free Experian Boost®ç feature. You can choose which accounts to add, such as those for many streaming services, cable, telephone, and utilities. You can be confident that a late payment won’t lower your credit score because Experian Boost only records on-time payments.
If you intend to use a credit card to pay for your utilities, be careful to monitor your credit card balances to avoid having your credit utilization increase too much due to an unforeseenly high electric bill. You can receive real-time alerts from Experian’s free credit monitoring service about significant changes to your credit report. In order to ensure that using credit cards to pay utility bills won’t negatively impact your credit score, it also gives you access to your Experian credit report and your FICO® ScoreTM.
Apply for credit cards with assurance and receive tailored offers according to your credit history. Get started with your FICO® Score for free.
FAQ
Can I pay electric bill using credit card?
You can use Mastercard, VISA, or JCB-powered credit and debit cards. What are the benefits of using Meralco Online or the Meralco Mobile App for bill payment? You can pay your bills from anywhere at any time.
Can I pay bills through credit card?
Easily pay all of your bills with your HDFC Bank credit card. Sign up Once a biller has been registered, you can automate bill payments. You don’t have to wait in line, write checks, or keep track of deadlines.
Does a credit card bill count as a utility bill?
Some cable companies accept credit card, other don’t. Obviously not, a bank statement does not qualify as a utility bill. Utility bills include water, gas, electric, phone and cable/internet.
Read More :
https://www.experian.com/blogs/ask-experian/can-you-pay-utilities-with-credit-card/
https://financebuzz.com/pay-utility-bills-with-credit-card