Pay Electric Bill With Credit Card: A Complete Guide

Paying your electric bill with a credit card can be a smart move if done correctly. It allows you to earn rewards like cash back or travel miles on a regular expense. However, credit card processing fees and the risk of debt make it unsuitable for some. This definitive guide covers everything you need to know about using credit cards for electric bills.

Overview of Paying Electric Bills With a Credit Card

Most major electric companies accept credit cards as a payment method. The convenience of earning rewards while avoiding late fees makes credit cards an attractive option. However, around 85% of electric providers charge a processing fee ranging from $1.50 – $5.85 per transaction.

You’ll need to weigh the value of rewards against these fees to decide if it makes financial sense. Credit cards that offer at least 2% cash back can cover the fees and still earn rewards at most electric companies. Using a card with no foreign transaction fee also helps when traveling or paying bills for a vacation home.

On the other hand, those carrying a balance or at risk of debt should avoid credit card payments The high interest costs negate any rewards earned. For most, paying electric bills from a bank account works out better

The Pros of Paying Electric Bills With a Credit Card

Here are the main advantages of charging your electric bill to a credit card

Earn Rewards

The biggest incentive is the ability to earn 1-6% cash back or travel rewards at no extra cost. On average, households spend $120 per month on electricity. That’s $1,440 annually at a standard 2% cash back rate equating to $28.80 rewards.

Cards tailored for utility bills offer even higher rewards. The Wells Fargo AutographSM Card provides cell phone protection and 3% cash back on gas, electric, internet, cable, and more. With no annual fee, it’s a cost-effective way to maximize electric bill rewards.

Convenience

Linking electric bill payments to a credit card automation through autopay. Avoiding late fees provides peace of mind. The ability to pay online or via a mobile app also provides convenience compared to mailing a check.

Credit Score Benefits

Using a card responsibly demonstrates creditworthiness. Timely payments help build your credit score when reported to the credit bureaus. Maintaining a low credit utilization percentage can also boost your credit.

Purchase Protection

Credit cards provide more protections than debit cards or bank accounts. You can dispute fraudulent charges or get reimbursed for damages through benefits like purchase protection and extended warranties.

Manage Finances

The spending summaries and budgeting tools associated with credit cards help monitor electric spend. You can catch questionable charges faster. Analytics identify spending trends across billing periods as well.

The Cons of Paying Electric Bills With a Credit Card

While the rewards potential is alluring, there are some drawbacks to consider:

Processing Fees

The majority of electric providers charge a credit card processing fee ranging from 1.5% – 5% of the bill amount. These $1.50 – $5.85 charges add up and can outweigh rewards earned, especially on small balances.

Debt Risks

The easiest way to maximize rewards is paying your statement balance in full each month. But with credit cards floating a balance is tempting. The high interest costs quickly overtake any cash back or points earned on the electric bill.

Credit Score Impacts

A higher credit card balance leads to increased credit utilization. Maintaining a utilization above 30% of your total available credit reduces your credit score. Keeping card spending in check prevents credit score damage when paying electric bills.

Remembering to Pay

Forgetting to pay the credit card bill can lead to late fees, interest charges, and credit score impacts. Setting payment reminders and enabling autopay helps avoid issues from an unpaid statement balance.

5 Tips for Paying Electric Bills With a Credit Card

Follow these tips to successfully earn rewards on your electric bill:

• Review processing fees – Avoid cards with annual fees and calculate if rewards exceed electric bill fees.

• Use autopay – Set automated payments to avoid late charges and credit score drops.

• Pay in full – Pay the statement balance each billing cycle to avoid interest costs.

• Mind utilization – Keep credit card balances low compared to available credit limits.

• Notify the provider – Alert your electric company before making a credit card payment.

Best Credit Cards for Paying Electric Bills

Here are some top picks for earning rewards on electric bills:

• Wells Fargo Autograph – 3% cash back on cell phone, electric, gas, internet, cable, and more

• Citi Custom Cash Card – 5% cash back in top spend category (electric) up to $500 per billing cycle

• Chase Freedom Unlimited® – 1.5% cash back on all purchases

• Capital One SavorOne Rewards – 3% cash back on grocery stores, dining, entertainment, and select streaming services

• Bank of America® Cash Rewards credit card – 3% cash back on utility bill category for Choice Rewards members

alternatives: Paying Electric Bills Without a Credit Card

If credit card rewards aren’t the right option, here are some alternatives for paying electric bills:

• Bank account – Most electric companies accept payments from checking or savings accounts, often with no fee. Automated payments can be set up as well.

• Debit card – A debit card links directly to your bank account balance rather than a line of credit. Some electric providers charge lower fees for debit cards.

• Money order – Traditional paper money orders allow paying electric bills in person or by mail without bank account access. They can be purchased at retailers like grocery stores.

• Prepaid debit card – Prepaid cards are loaded with a set amount of funds and work similar to debit cards. They help limit overspending compared to credit cards.

• Cash – Paying electric bills in cash is an option with select providers. It offers anonymous bill payment but requires an in-person visit.

• PayPal – Services like PayPal allow sending payments from a bank account to businesses. You can pay electric bills online through PayPal in some cases with minimal or no fees.

The Bottom Line

Paying electric bills with a rewards credit card can earn hundreds in cash back or travel perks each year. But it only makes sense if you avoid interest by paying in full, keep credit utilization low, and ensure rewards exceed processing fees. For most, using a bank account or debit card to pay electric bills is the smarter way to go. Carefully weigh the pros and cons before charging electric bills to find the best option for your financial situation.