Should you pay your utility bill with a credit card if you can?

By , CardRatings contributor

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Paying your utility bill with a credit card?

For some credit card users, it could be a smart idea. For others, not so much. And in some cases it can be impossible, for instance, if the utility doesn't accept credit card payments, which is sometimes the case, although debit cards seem to be accepted more readily.

And there are many reasons it can be a very bad idea to pay for a utility with your credit card. Particularly if you frequently end up carrying revolving debt, your $82 water bill could, in theory, become a $94 water bill, or a $111 water bill, or a… well, you get the idea.

Third-party payment services

And then a few years ago some third-party companies started cropping up, in effect saying, "Hey, pay your utility bill with a credit card through us. We have relationships with the utility companies and credit cards, and so you pay through us, and you get the convenience of paying with a credit card and getting rewards points."

Which sounds all well and good until you consider that frequently you have to add 2 to 3 percent to your bill for the convenience of paying it online when you could just buy a 44-cent stamp and send it in, and that the extra fee may well negate whatever rewards you'll get with a credit card. I suppose if you make a ton of money, and time being money, there is an argument that the fees are worth it. But admittedly, I'm a cheapskate, and I still can't help wonder what was so wrong about the old way of paying your utility, via snail mail.


That said, ChargeSmart.com, an online bill payment service, has taken some of the wind out of my cheapskate sails.

ChargeSmart, which also allows people to pay their mortgage, auto loan and student loans through their website, recently debuted a new feature that takes away many of the arguments against paying utilities with a credit card.

About two months ago, ChargeSmart partnered with Discover, so Discover cardholders will receive an instant rebate when they use their credit card to pay their water bill, electric, gas or any other utility. In other words, as long as the utility payment doesn't become part of their revolving debt, paying a utility through ChargeSmart can be free.

Eventually, ChargeSmart CEO Tim Brinkman told me, the goal is for consumers to have instant rebates from all the credit card companies and banks out there.


And he says that the convenience factor is worth more to people than one might think. Most of ChargeSmart's customers, says Brinkman, are there for the convenience.

"That was a little bit of a surprise to us," Brinkman says. "When we originated the concept, we figured, given our fee structure, that most people using it would be using it for cash management purposes. People can basically delay the payment of bills by 45 days when they put it on a credit card, and if you have a lumpy earning stream, like a retailer, or if unexpected expenses come up, this lets them use our service in the most economical manner. But, to our surprise, mostly it's the convenience user."

Brinkman paints a dire picture of people who pay utilities through a utility website with their credit or debit card. "Most websites, when they do enable you to pay with a credit card, are clunky," Brinkman says, "and you have to sift through about seven or eight screens and then register and give them your password ID and user name. With our site, you can pay your utility in about 30 seconds."

I personally would probably go through 20 or 30 clicks of the computer mouse to save a little money, over paying a third party to send my payment online, but I know what he means. Some utility companies can make paying online a pretty big hassle.

Why some utilities don't take credit cards

I asked Brinkman why that is, why utility companies haven't been as quick to accept credit card payments. He says it's due to the interchange fee that credit cards charge for processing payments. Retailers accept them as a cost of doing business, says Brinkman. He's right, of course. If you're selling something in a store, and you don't accept credit cards, you're going to have 500 competitors that do accept them.

"But with utilities," Brinkman says, "they don't need to accept credit cards for competitive reasons, and that's where we can step in. The extra fee is worth it to the customer but not worth it to the utility."

You can agree or disagree with that, but not on his next point. Adds Brinkman: "The utilities will get their money, or they'll turn your service off."




  1. Pax September 28, 2011 - 5:19 pm
    That's huge! I've been waiting forever for a chance to pay utility bills with my card so I can rack up the points, I've always hated those "convenience fees".

    Now if only I had a Discover card. Too bad they don't offer this for Amex.
      Reply »  

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