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If you’re wondering whether you can pay utilities with a credit card, the answer is likely yes. In many situations, you can break out the plastic and charge your electricity, wifi, phone, and other basic expenses.
That said, while using a credit card as your payment method may be the most convenient option for you, there are some factors to consider to make sure you are doing what’s best for your overall financial picture. For example, some bill processors may charge convenience fees. If you carry a balance on your credit card, you may end up paying interest as well.
In these ways, paying utility bills with a credit card may not be the most economical nor the most financially wise move to make. Read on to learn how to size up the situation and decide how to pay your utility bills.
Key Points
• Paying utilities with credit cards is possible in many situations, including for electricity, wifi, and phone bills.
• On-time credit card payments for utilities may positively impact credit scores while earning cash back rewards and helping to meet sign-up bonus spending requirements, if relevant.
• Automatic payment set-up, convenient tracking of spending through statements, and dispute resolution capabilities through credit card issuers are some possible benefits of using credit cards for utility bills.
• Cons of using credit cards for utilities may include utility companies charging convenience fees as percentages of bill amounts, plus a cardholder accruing high-interest debt if the full balance isn’t paid each month.
• Payment methods for using credit cards to pay utility bills include directly through utility company websites, through third-party processing services, or in some cases, over the phone.
What Bills Can You Pay With a Credit Card?
You typically can pay for most bills using your credit card. Some of these include:
• Rent
• Car insurance
• Medical bills
• Cell phone bills
• Internet fees
• Cable
• Utilities (like electricity and sewage)
• Subscription and streaming services
• Taxes
Recommended: How to Build Credit With a Credit Card
Pros and Cons of Using a Credit Card to Pay Bills
Paying utilities with a credit card may seem like a convenient choice, there are some risks and downsides. Consider these pros and cons before making your decision.
Pros
First, consider the possible benefits of using a credit card to pay your utility bill:
• Potential to positively impact credit score: Most credit cards report your payment activity to all three major credit bureaus — Experian®, Equifax®, and TransUnion®. Paying consistently on time is one of the main factors that help determine a credit score.
• Earn rewards: Using a cash back or rewards credit card to pay utility bills could help earn a percentage back on your spending or points toward, say, travel. Some cards may earn you higher rewards than others.
• Help meet reward sign-up bonuses: Some credit cards offer a sign-up bonus if you can meet a certain spending requirement within a predetermined amount of time. Since you need to pay utilities every month anyway, charging it on a credit card may get you closer to the minimum spending requirements.
• Convenient way to track spending: By putting your utility payments on your credit card, you can track them through your credit card statements each month, or when logging into your credit card account online.
• Dispute payments: Say you accidentally pressed the payment button twice, or there are some suspicious charges on your utility bill. Using a credit card means you can dispute it through your credit card issuer.
• Can set up automatic payments: Depending on your utility company, you may be able to authorize automatic credit card payments. This could be helpful to ensure you pay utilities on time.
Cons
Next, review the potential disadvantages of breaking out your plastic to pay your utility bills.
• Could negatively impact credit scores: Not paying credit card bills on time may result in a drop in credit scores. Plus, if you use your credit card for more than just utility payments, racking up a large balance could affect your credit utilization ratio (the percentage of available credit you’re using on revolving credit accounts). Higher credit utilization could signal to credit scoring agencies and lenders that you need to rely on credit in your financial life. As such, that might lead to a negative impact on your credit score.
• Potentially pay fees: Some utility companies charge a convenience fee, which is typically a percentage of your bill amount. In most cases, this fee is to help offset the processing fees charged by credit card companies. The cost may be more than any rewards you earn. Fees might also easily add up if you regularly use your credit card for utility payments. Consider carefully whether this payment method is the best financial choice.
• Possible interest charges: Aside from potential negative effects on your credit score, you’ll end up paying interest on any balances you carry from month to month. Generally, the interest rates on credit cards are high, which means you end up paying more overall for your utilities.
Recommended: Does Paying Utility Bills Build Credit?
Should You Pay Bills With a Credit Card?
Paying bills with a credit card may be a smart choice for an individual who is looking to help build credit and earn rewards. But there are possible consequences such as excessive fees and interest charges.
For instance, perhaps you consistently pay your credit card bills each month (ideally the entire balance). In this case, you may be able to reap the benefits of using a credit card. However, if you get charged a convenience fee each time (and you have multiple bills to pay) and can only afford the minimum credit card payment, then you may want to reconsider using credit cards.
Whatever your choice, be sure to check the terms of your credit so you know when your due date is, as well as the interest rate and late fees.
How to Pay Utilities With a Credit Card
There are several options to pay utilities with a credit card, including directly through the utility company or through a third-party processing company. Each option typically asks you to sign up for an account online and verify information such as your address and other personal details. To pay, simply follow the prompts presented to you on the screen. There may be an option to select to charge your utility bills each month automatically.
Before pressing the “submit” button, look for information indicating any convenience fees you’ll pay in dollar amounts. Some utility companies also accept credit card payment by phone — check to see if this is an option for you, if you’re interested in that method. You want bill pay options to suit your needs, not just those of service providers.
How On-time Utility Payments Can Positively Impact Your Credit
Utility payments aren’t directly reported to the three major credit bureaus, so they don’t necessarily have an effect on your credit. However, if you use a method of payment that does report to the credit bureaus — like credit cards — then it may have an impact.
For instance, if someone consistently makes on-time credit card payments, credit bureaus will report the positive behavior. Credit scoring agencies may look at this behavior more favorably and that might positively impact the person’s credit score as a result.
There are some credit bureaus that report your utility payments, but not all do. If you need the answer, you can look at your free credit report (available at AnnualCreditReport.com) to learn more.
Tips to Paying Bills With a Credit Card
Whenever you pay by credit card, you’ll want to use your plastic responsibly and carefully. This holds true for paying utility bills by credit card, too. Here are some pointers.
• Monitor your bank account to ensure there’s enough money when you pay your credit card bill, or you could risk overdraft or NSF fees.
• Be sure to make at least the minimum credit card payment to prevent late fees, which could have a negative impact on your credit report.
• Check to see if a convenience fee is charged for making payments by credit cards.
• Watch your credit utilization to prevent it from going too high.
• Monitor your credit card transactions, and report any fraudulent activity right away.
The Takeaway
In many cases, you can pay for utilities with a credit card. But you’ll need to weigh whether this is the best move for you. It might be a way to conveniently take care of bills, earn rewards, and build your credit. Or it may lead to more credit card debt, interest payments, and convenience fees. Explore all the pros and cons before making a decision.
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FAQ
Is it better to pay utilities with a credit card or bank account?
The choice to pay with a credit card or bank account depends on your financial situation and preferences. There are benefits to using a credit card such as earning rewards and tracking your payments, but you may have to pay a convenience fee for the privilege. And you may accrue more high-interest debt if you can’t pay the full balance each month.
Can I pay my mortgage and utilities with a credit card?
In most cases, you can pay your utilities with a credit card. Unfortunately, most mortgage companies don’t allow you to pay your monthly payments with a credit card. There may be third-party processing companies that allow you to do so, but you’ll most likely pay a convenience fee.
Is paying a bill with a credit card considered a cash advance?
Possibly. Some credit card issuers consider paying a bill with a credit card a cash advance, while others do not. Cash advances may include fees such as transaction fees and a higher APR. Check with your specific credit card issuer to find out if they consider paying bills a cash advance.
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