Should I Pay My Utility Bills With a Credit Card?

Q: Is it a good idea to pay my utility bills with a credit card?

A: Like taxes and rush-hour traffic, paying bills is a necessary, albeit painful, part of life. The bills will show up in your mailbox or inbox month after month after month. As you pay those bills, it’s a good idea to choose a payment method that works best for you and might provide a little giveback, such as paying via credit card. Paying your monthly bills this way can have several significant advantages.  

Here are 5 reasons to consider using your credit card to pay your utility bills. 

1. Automate Your Payments

When you pay utility bills with a credit card, you can set up your bills to be paid automatically when they’re due. This is a lot more convenient than remembering to pay each bill before it’s due by phone, via mailed paper check or by calling and having the amount charged to a debit or credit card. When your bills are paid automatically, you’ll have just one payment to make – your credit card balance. Take one task of money management off your list and never miss a payment!

2. Earn Rewards

You need to pay your bills; why not earn rewards when you do? A high-rewards card, or one that pays in points or miles, can help you earn loads of bonus points or miles in a year’s worth of bills. You can also pay your bills through a credit card to help you reach a spending minimum to earn your new card sign-up bonus.

3. Track Your Spending

Budgeting is easier when your payments are digital and happen within one channel. You’ll see all of your bill payments on your credit card statement each month, and you can easily track your expenses for utility bills that fluctuate with use. Having your spending tracked through your credit card account makes budgeting simple. 

4. Protect Your Purchases 

Many credit cards offer outstanding consumer protection on purchases made by cardholders. This can include zero liability in cases of fraud. When you pay your bills via credit card, you can keep an eye on your account to ensure all payments are proceeding properly. If you see any errors, such as your card  being charged twice for the same payment or being charged the wrong amount, you can dispute the charges. On the flip side, if you pay your bills via paper check or cash, you have zero protection if the money is lost in transit

5. Keep Your Cards Active

If you’re looking to improve your credit score or to grow your credit file, it’s a good idea to have multiple open and active cards. Paying your utility bills via credit card will help to ensure your card(s) is/are getting used each month. This can help your score improve within a few months.

Before Using Your Credit Card for Bill Payments

While there are significant advantages to paying your utility bills, there are several pitfalls to note before you go this route:

• Extra Fees. Some service providers charge a convenience fee for paying a bill via credit card to help them cover the processing fee for each transaction.
• Interest. Only pay your bills via credit card if you can pay the credit card bill in full when it is due. Otherwise, you can rack up interest on your credit card balance and ultimately pay a lot more for your utility bills than you’d originally been charged.
• Debt Accumulation. If you’re already struggling to pay off a large amount of debt, it’s best not to charge more payments to your credit cards.  
• Increased Credit Utilization Ratio. For consumers who constantly use their credit cards, paying monthly utility bills with a credit card can push their credit utilization ratio over the recommended 30% limit and adversely affect their credit score.

Paying your utility bills with a credit card can have several advantages. Before going this route, though, ensure that it is the right option for you and your money management style.                                                                                                                                                                                                                                       

Your Turn: Do you pay your utility bills, or other bills, with a credit card? Tell us about it in the comments.