First you need to find out if your utility provider will accept a credit card as payment. If they don't, you may still be able to go through a third-party company.

Next, you need to determine if this move makes sense for your personal financial habits. 

For some credit card users, using a credit card to pay a utility bill could be a smart idea. For others, not so much. 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 more.

If you pay your bill in full each month and on time though, there could be benefits to paying your utility bill with a credit card.

Let’s break down the pros and cons of this approach:

Pros of paying a utility bill with a credit card

Earn rewards, points, and bonuses

One of the primary reasons people want to pay their utility bill with a credit card is to earn rewards. Say you have a credit card that offers 2% cash back on all purchases. Pay your utility bill with you credit card, and suddenly you’re pocketing cash back on a purchase you have to make regardless.

Another perk of this approach is that it can help you meet a credit card welcome bonus spend threshold. If you have a new card, for example, that offers $500 cash back once you spend $3,000 within three months, using that card for everyday expenses like your utility bill can help you earn that bonus.

Paying utilities with your card can help you meet the threshold to receive rewards without increasing your spending. You'll have to pay that money to your utility provider anyway, so you might as well earn some extra benefits from it.

Additional protections

If your utility provider charges you the wrong amount on your bill, you have extra protection by using a credit card. Thanks to the Fair Credit Billing Act, if there’s a wrongful charge on your credit card statement, these errors can be corrected. You can contact your credit card issuer directly if you cannot resolve the error with the provider first. The issuer will investigate the transaction and either refund the incorrect amount or explain why the charge was correct. You won’t get this same level of protection by using a check or debit card, so using a credit card adds some peace of mind.

Convenience

Old fashion "snail mail” has become somewhat tedious in our fast-paced society. The time spent checking your bank account, writing a check, addressing an envelope and finding a stamp can add up every month.

You can bypass the hassle by setting up automated payments with your credit card. This will also help ensure that you never miss a payment.

More time to find funds

Let's say your cable bill is due on Oct. 1, but your bank account is empty, and you won't get paid until Oct. 5. Using your credit card to pay can give you some extra time to get the cash together. If you are currently living paycheck-to-paycheck, this can be a lifesaver. Some credit cards even offer intro 0% APR periods, which can buy you extra time to pay off your bills if you need it. Just make sure you will be able to pay off the balance by the time the interest kicks in or that $100 bill could end up costing you a lot more.

Track expenses on one statement

You can condense all of your expenses onto one statement if you use your credit card to pay for everything. This is easier than searching through multiple documents to record your spending.

Instead of paying multiple bills throughout the month, you can just pay them all at once when you receive your credit card statement.

You can also sync up your credit card with a budgeting app like You Need A Budget or Mint. These apps automatically track your accounts and spending so that you can see an overview and breakdown of all of your finances.

Cons of paying a utility bill with a credit card

Merchant fees

More companies offer to take credit card payments now compared to in the past, but some will still charge you for merchant fees. These are fees that the merchant has to pay to process your payment. Usually the fee is between 1-3%.

If your utility provider charges a fee for processing a credit card payment, you'll need to do a little math. The fee may cancel out the rewards you would earn from your card. Or, you may receive more value back from the rewards, so the fee may not be a big deal.

For example, let's say you have to pay a 1% fee, but you get a 2% cash-back reward on any purchase made with your card. It works in your favor to still pay with your credit card because you'll get the 1% difference back.

However, if you only get a 1% cash-back rate and the fee is 2%, using a credit card will only cost you extra money.

Increased debt

If you already have credit card debt, you may want to use a different payment method. Charging more expenses to your credit card will only increase your balance, increasing the amount of interest you have to pay.

If you're already struggling with credit card debt, it's best to put your card away until you pay off your balance. Charging more to your card will only make it harder for you to get out of debt.

Added interest charges if the balance carries

Interest charges add up much faster than you think. If you don't have the money to pay off the card, your utility bill could end up costing you way more than the original bill.

Never charge expenses to a credit card that you won't be able to afford when the bill comes due. Would you rather pay $100 for your water bill now or $125 in the future?

Potentially lower credit score

Paying a utility bill with a credit card could hurt your credit score if it increases your credit utilization. Credit utilization is how much credit you are using compared to how much is available to you.

For example, if you have a $5,000 credit limit and a $1,000 balance between three cards, your credit utilization is 20%.

You should try to keep your credit utilization under 30%, so reconsider putting bills on your card if it will put you over that percentage.

How to pay a utility bill with a credit card

If your utility provider doesn't accept credit cards as payment, you can still go through a third-party company like Plastiq or Melio.

These companies pay the utility provider with whatever form of payment they prefer (i.e., check or bank deposit). After they pay the provider, they charge the transaction amount to your credit card.

However, these companies do charge a convenience fee, so make sure it works out in your favor financially to use one of these companies.

So, should you pay your utility bill with a credit card?

The answer depends on a few different factors, such as the card's rewards program, your ability to pay off the card and convenience fees charged by the utility company.

If your provider does not accept credit cards as payment, you still have the option to pay through a third-party company.

The most important note to remember is to never charge anything to your credit card that you won't have the cash to pay for when your bill is due. Instead, always pay off the entire balance on time each month.

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