Credit Cards

How To Pay Utility Bills With Credit card

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 4 minute read

How To Pay Utility Bills With a Credit card? Processing fees may add up quickly when you use a credit card to pay your utility bills.

Getting the most out of your rewards credit card might help you save money in the long run. At the same time, you want to keep your credit card balance low.

You may earn important benefits without building up a large balance by using your card to pay for normal items such as your utility bills, which you must do anyhow. An annual utility bill of roughly $4,000 is not uncommon for a single-family home. That money might be put to good use if you have a decent credit card that offers points.

Does it mean it’s a good idea all the time? Before you use your credit card to pay your utility bills, consider the following information.

Using a credit card to pay for utilities is a risky business.

Using a credit card to pay for utility bills may sound like a no-brainer, but there are a number of perks and downsides that you should keep in mind before making the decision.

It makes sense to pay for utilities using a credit card four times.

  • Payroll automation is what you’re after. With a credit card, you may often enroll in automated utility payments. With autopay, you won’t have to worry about missing a payment.
  • You want to keep an eye on your finances. You may use budgeting applications like Mint or You Need a Budget to track your spending and manage your money by syncing your credit cards with these apps.
  • If you don’t want to write a check, then you should avoid it. To avoid having to write a check, transfer funds to your checking account, or store stamps, you may pay your utility bills using a credit card.
  • You want to be rewarded for your efforts. If you pay for your utilities with a credit card, you can get rewards points or cash back. With a card that offers 1.5 percent back on every transaction and a yearly utility bill of $4,000, you’d earn $60 in cash back just by paying the bills.

Using your credit card for utilities three times may not make sense.

  • Credit card points may not cover the utility provider’s expenses, so be careful to check with the firm to see whether they impose a processing or convenience fee for using a credit card while paying your bill.
  • You’ll need a third-party provider to accomplish this. In some cases, you won’t even be able to use a credit card. If you want to use a credit card, you’ll have to utilize a third-party service instead. These extra services, however, come at a cost.
  • You’re concerned about the state of your credit. When paying for utility bills, it’s conceivable that using a credit card might negatively affect your credit score. 30 percent of your FICO credit score is based on how much of your available credit you use. In other words, if you rack up more debt on your card, your credit usage rate rises, which in turn lowers your credit score.

How to use a credit card to pay your power expenses

You may pay your utility payment with a credit card at the majority of power, water, mobile phone, and internet service providers. While some may charge a fee for using a credit card, there are others that do not. There might be costs ranging from $1.50 to $5.85 for each transaction, according to the National Association of State Utility Consumer Advocates.

Using a credit card to pay your power bill costs you $5.85 for every transaction, which works up to a total of $70.20 per year in fees. Using a credit card to pay for your electricity bills might cost you as much as $100 or more in additional fees.

If your utility company does not accept credit card payments, Plastiq, a third-party business, can help you get around this. Your utility payment will be paid by cheque or money transfer once you pay these service providers using a credit card.

Keep in mind that some services come with additional costs. Plastiq, for example, levies a transaction fee of 2.5 percent. If your power bill is $100 a month, you’ll have to pay an extra $2.50 in fees—or $30 a year—to cover the higher costs of the new bill.
Is it worth it to pay the fees?

Is it worth it to pay the fees?

To make an informed decision about whether or not to pay utility bills using a credit card, it’s vital to take into account the fees and possible benefits. If you have a cashback rewards credit card, you may be able to get 1.5% back on utility purchases. A $1.50 reward is given on a $100 note. Credit card rewards are great provided you don’t have to pay a $2.50 processing or convenience charge.

With the right card, though, it may be worth it. You may receive 5% cashback every three months with the U.S. Bank Cash+ Visa Signature Card, for example. You can get $5 back on a $100 utility bill if you pick utilities as one of your bonus categories. This might help offset any convenience fees you may have to pay.

You can earn important points by using a high-enough rewards credit card or using your card to pay utility bills that don’t charge a fee at all. Fortunately, this is getting more and more prevalent: It is estimated that around 30 utility providers now offer fee-free credit and debit card processing, as reported by Electric Light & Power.

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