How To Pay Your Utility Bills With a Credit Card

Paying monthly utility bills is a necessity to keep essential services like electricity, water, gas, and telecommunications running. For many households, autopaying bills from a checking account is the standard routine But could using a credit card to pay utilities be a better option?

Credit cards provide some potential benefits as well as drawbacks to consider. This guide will walk through everything you need to know about paying utility bills with a credit card.

Benefits of Paying Utility Bills With a Credit Card

Here are some of the main advantages of charging your utility payments to a credit card each month

• Earn rewards: Many credit cards offer cash back, points, or miles when you use them for spending. Putting your utility payments on a rewards credit card can help you accumulate more perks.

• Ensure on-time payment: Setting up autopay from a credit card guarantees your bill gets paid each month, even if your checking account balance is low. This prevents late fees or service interruptions.

• Simplify disputing errors: If your utility bill seems incorrect, it can be easier to dispute a charge on your credit card statement vs. trying to get an erroneous bank payment reversed.

• Establish credit history: Making on-time payments with a credit card demonstrates responsible usage which can help build your credit, especially important for those new to credit.

• Consolidate spending: Charging all utilities to one credit card lets you easily track this category of expenses each month on your statement.

• Access credit during low cash flow: During months when your bank account is running low, you can pay essential utilities using credit available on your card to keep services on.

• Qualify for bonuses: Some credit card bonuses require you to spend a minimum amount within a certain time frame. Utility payments can help drive up your spending to earn the bonus.

Drawbacks of Paying Utilities With a Credit Card

However, there are also some potential disadvantages to watch out for with this payment method:

• Credit card fees: Your utility company may charge convenience fees for using a credit card, generally $3-5 per payment. This can add up over a year.

• Higher interest costs: If you carry a balance on the card, interest charges will increase the overall bill. Credit card interest rates are usually quite high.

• Credit utilization concerns: Putting all utilities on one card could drive up your credit utilization ratio, negatively impacting your credit score if too high.

• Forgetting to pay: It’s essential to pay your full credit card balance on time each month. Failing to do so means interest charges and a credit score hit.

• Difficult to budget: When utility expenses all hit one consolidated credit card bill, it can be harder to track spending in your budget across utilities.

Overall, weigh the pros against any cons based on your financial situation. Using credit cards for utilities offers convenience but requires diligence to avoid drawbacks.

How To Set Up And Manage Credit Card Payment

If you decide paying utilities with a credit card makes sense for your situation, here are some tips for setting up payments and managing the account effectively:

• Check fees: Contact the utility companies to learn if they charge processing fees for credit card payments before setting up automatic payments.

• Choose the right card: Pick a credit card that offers strong rewards on utility category spending and fits your spending habits.

• Estimate costs: Add up typical monthly charges for each utility to ensure you don’t overload a single card and run up your utilization.

• Split charges: Consider dividing utilities between multiple cards if needed to avoid hitting the 30% utilization threshold on any one card.

• Autopay full balance: Set up autopay to pay your full credit card statement balance each month to prevent interest charges.

• Monitor statements: Review statements closely each month to ensure there are no erroneous utility charges. Dispute any discrepancies.

• Watch credit impact: Periodically check your credit score to ensure paying utilities with your card isn’t hurting your credit.

• Have a backup plan: Maintain an alternative payment option like a checking account as a backup if you need to cancel the credit card.

Which Utilities Can You Pay With a Credit Card?

Most utility companies accept credit cards, but payment policies can vary. Typically you can pay the following bills with a credit card:

• Electricity
• Gas
• Water
• Sewer
• Phone
• Cell phone
• Cable
• Internet
• Trash pickup
• Home security system

Some utility providers may limit you to paying certain bills with a credit card, not all services. Contact your providers to learn their specific payment policies.

Strategies for Managing Utility Credit Card Payments

• Track expenses: Since utility payments won’t hit your checking account, be diligent about monitoring utility credit card charges each month to catch erroneous bills.

• Pay bill in full: Never carry a balance on your utility credit card. The high interest rates can quickly create excessive debt.

• Automate payments: Set up autopay through your credit card to have the full bill paid on the due date so you never miss a payment.

• Earn bonus rewards: Use a credit card that provides extra bonus rewards for your highest utility bill categories like electricity, cable, or cell phone.

• Watch for fee changes: Utility companies sometimes adjust convenience fees for credit card payments. Review statements regularly for any fee increases.

Which Credit Cards Are Best for Utility Payments?

The best credit cards for utility bill spending offer strong rewards rates in these categories with no or low annual fees. Top options include:

• Citi Custom Cash Card – 5% cash back on your highest eligible spend category each month, including utilities. $0 annual fee.

• Chase Freedom Flex – 5% cash back on up to $1,500 in utility purchases each quarter. $0 annual fee.

• Wells Fargo Autograph – 3% cash rewards on cell phone, internet, cable, and streaming services. $0 annual fee.

• Citi Premier Card – 3x ThankYou points per $1 spent on gas, groceries, and air travel. $95 annual fee.

• Bank of America Customized Cash Rewards – 3% cash back choice category, 2% grocery stores & wholesale clubs. $0 annual fee.

Paying Utility Bills With Credit Cards – The Verdict

Paying your utilities with a credit card offers convenience and can help you earn rewards points or cash back. However, you need to be diligent about paying your statement balance in full each month to avoid interest charges. Putting all utilities on one card could drive up your credit utilization ratio too, so consider dividing bills between multiple cards. Overall, credit card utility payments provide benefits but require responsibility.