Pay Electric Bill With Credit Card: A Comprehensive Guide

Paying your electric bill with a credit card can be a great way to earn rewards and build your credit score. However, it also comes with some potential drawbacks that you need to consider. This comprehensive guide will walk you through everything you need to know about using credit cards to pay electric bills.

Overview of Paying Electric Bills With a Credit Card

The idea of earning rewards like cashback or travel points while simply paying your normal electric bill is appealing. Credit card issuers offer lucrative signup bonuses and ongoing rewards to encourage this behavior. As long as you pay off your bill in full each month this strategy can work well.

However, some electric companies charge convenience fees for credit card payments These fees can sometimes cancel out the value of any rewards you earn It’s important to crunch the numbers and see if the math works out in your favor.

Paying with a credit card also introduces the risk of carrying a balance and accruing interest charges. If you do not pay off your bill in full each month, the extra interest fees can quickly outweigh any rewards earned. Maintaining on-time payments is critical.

Benefits of Paying Electric Bill With a Credit Card

Here are some of the potential benefits of charging your electric payments to a credit card

• Earn rewards: Most rewards credit cards offer between 1-5% back in cashback or points on every purchase. This allows you to earn rewards passively on this recurring bill.

• Utilize sign-up bonuses: Credit card welcome offers can be extremely generous, often over $500 in value. Paying bills helps meet minimum spend requirements.

• Build credit: Responsibly making purchases and payments with a credit card demonstrates good financial behavior. This helps build your credit score over time.

• Convenience: Taking advantage of autopay features is easier with credit cards than checking accounts. This ensures you never miss a payment.

• Purchase protections: Many cards offer benefits like extended warranties, return protection, and travel insurance.

Drawbacks of Paying Electric Bill With a Credit Card

Here are some potential risks and downsides associated with placing electric bills on a credit card:

• Interest charges: If you carry a balance, interest charges can quickly cancel out any rewards earned. This makes credit cards expensive debt.

• Fees: Most electric companies charge convenience fees for credit card payments, usually around 2-5%. These fees can erase any rewards.

• Credit utilization: High balances relative to your credit limit (utilization) can negatively impact your credit score. Try to keep this below 30%.

• Spread too thin: Charging too many bills to a card can make it hard to track spending and payments. Keep things simple.

• Rewards caps: Some cards cap bonus rewards at a certain spending limit per year. Paying bills may max this out faster.

• Forgetting autopay: Missing payments because you forgot to enable autopay can hurt your credit score and lead to fees.

Tips for Paying Electric Bill With a Credit Card

If you want to pay electric bills with a credit card responsibly, keep these tips in mind:

• Review your electric company’s fee policy – if fees are high, avoid using a card
• Pick a card with rewards for everyday spending to maximize earnings
• Track your credit utilization and keep it below 30%
• Set payment reminders and enable autopay to avoid missed payments
• Pay your balance in full each month to avoid interest charges
• Compare rewards earned to fees paid to ensure you come out ahead

Best Credit Cards for Paying Electric Bills

Here are some of the top credit cards for paying electric bills and earning rewards:

• Citi Double Cash Card – Earns 2% cashback (1% when you pay) with no caps.

• Chase Freedom Unlimited – 1.5% cashback on all purchases. Great for beginners.

• Capital One SavorOne Rewards – 3% cashback on groceries, 2% on utilities with no annual fee.

• Bank of America Cash Rewards Credit Card – 3% cashback category can be chosen as gas, online shopping, dining, etc.

• Wells Fargo Active Cash Card – 2% cashback on all purchases with $200 welcome bonus.

Electric Company Payment Policies

Before using a credit card, be sure to check your electric company’s payment policies. Here are some examples:

• PG&E – No fees for credit/debit payments with autopay enrollment

• ConEdison – Charges $1.95 fee for credit card payments

• Duke Energy – $2.50 fee for credit card payments under $5,000

• Eversource – $3.95 fee for credit card payments

• Southern California Edison – No fees for credit/debit card payments

Policies vary greatly, so do your research before paying electric bills with credit cards.

Is it Worth it? Do the Math

At the end of the day, running the numbers for your particular situation is key. Compare potential rewards earned to the fees charged by your electric company.

For example, if you earn 2% cashback but your electric company charges a 3% fee, you’ll lose money on the transaction. However, if you earn 3% cashback and there is no fee, you’ll come out ahead.

Do the math each month and if rewards consistently outweigh fees, then paying with credit cards can be rewarding. Otherwise, stick to more traditional payment methods.

The Bottom Line

Paying your electric bill with a rewards credit card can be a smart money move but also comes with risks. Consider your specific electric provider’s policies, your ability to pay bills in full, and your overarching financial situation before making a decision. Use this guide to make an informed choice about whether putting electric payments on credit cards makes sense for your situation.