Utility bills make a significant portion of our monthly expenditure. These include indispensable payments like electricity bill, water bill, piped gas bill, telephone bill, etc. A lot of users pay these bills online via net banking or service provider websites but, nowadays, credit card issuers are also encouraging users to pay their utility bills through credit cards. But is it a feasible option? Let’s find out.
Utility Bill Payment through Credit Card
Paying your utility bills seems like a great way to earn more rewards. But is it wise to pay bills with your credit card?
Not all bills are created equal, so you will need to evaluate each one to determine which ones make sense to pay with a credit card. Hence, before you begin paying your bills with your credit card, it is very important to have a clear plan for what cards you will use, what bills you will pay and how you will pay off your credit card bill.
How does it work?
The whole process of paying utility bills via credit card varies across banks. You might even find different options with the same bank. . The general method, however, is that first, you will have to create a login account with your card issuer. After the account is created, you are required to add the billers from the list that the bank provides. The list will include all utility service providers for gas, telephone, electricity, water, DTH, insurance etc.
It is to be noted that the biller should be in the bank’s list otherwise you won’t be able to use this service. For payment, you just need to select the biller and enter the details required such as customer number and the required amount for payment.
For example, if you are an HDFC Credit Card user, you can pay the utility bills via SmartPay.
SmartPay is an automatic payment facility available on your credit card to pay any of your utility bills (mobile postpaid/ telecom/ gas/ water/electricity/ DTH/ rent/ insurance). The service is free of cost and also enables you to earn up to Rs. 1,800 cashback for the first 12 months. You can register for SmartPay by Login NetBanking –> Cards –> Transact –> SmartPay.
Setting up Standing Instructions on Your Credit Card for Utility Bill Payment
Standing Instruction is an easy auto-pay option with one-time registration to take care of the future payment automatically. This is basically an auto-debit service that facilitates automatic payment of your card’s outstanding from your bank account on the payment due date.
For example, if you wish to avail this service on your SBI Credit Card, you have to download the Auto Debit activation form from here, fill up the details required and then send the physical copy to the bank on SBI Cards and Payment Services Ltd.
P.O. Bag No.28, GPO, New Delhi – 110001.
Those who enroll for standing instructions are entitled to receive significant benefits. For example, SBI Card PRIME offers 20 Reward Points per Rs. 100 spent on standing instructions of Utility Bills payments, with a capping of 3,000 Reward Points per month.
Also, if you make automatic payments through your HDFC Bank Credit Card, you are entitled to get the following benefits:
- 5% cashback for the first 6 months after registration
- Save up to a maximum of Rs. 150 per statement cycle
- Set maximum limits on your bills
When Paying Utility Bills with your Credit Card makes sense
1. You want to earn more rewards
If you use a rewards credit card for paying your utility bills then you will be able to earn reward points in return. As long as you pay your balance in full every month, the extra rewards you receive will serve as an added advantage. For example, Standard Chartered Manhattan Platinum Credit Card offers 3X Reward Points on Utility Bill Payments.
2. You want certain bills to be paid automatically
One of the biggest advantages of credit cards is that you can set certain bills on auto-pay to avoid missing a due date. In this way, you will not have to worry about missing payments. As soon as your bill due date arrives, it will be paid automatically from your credit card.
3. You want an easy way to track your spendings
Credit cards serve as a great budgeting tool if you use them the right way. Each bill you will pay using your credit card can be easily tracked via credit card statement. In this way, you will be able to use your credit card to stick to your budget and keep track of all your purchases.
Using a credit card lets you avoid the hassles of paying in cash or visiting the service provider’s website to pay the bills every month.
When Paying Utility Bills with your Credit Card doesn’t make sense
1. You are already struggling with debt
If you are already in debt or struggling to avoid debt, charging regular bills to your credit card could make things worse. While a credit card can help you out temporarily, you should never rely on credit cards solely. If you are in debt, you should pay utility bills from your bank account.
2. When convenience fee is charged on utility bill payment
While some companies will let you pay bills with a credit card without any additional fee, others charge a convenience fee to cover the merchant fees they are charged by the credit card companies. To pay your electric or gas bill, for example, you may need to pay an extra 2% to 3% if you use a credit card.
3. You are an overspender
If you are inclined to overspend with a credit card, you should stick to cash or debit instead. After all, the convenience of paying with your credit card can make a bad spending problem even worse.
4. You are unable to pay your credit card bill in full each month
Credit card interest rate ranges from 16% to 49% per annum, which makes credit cards not an ideal option if you plan to carry a balance each month. In such a case, you should always avoid putting new expenses on your card, whether they are utility bills or any other expense.
Have a quick look at the pros and cons of paying utility bills using your credit card-
Best Credit Cards for Utility Bill Payments
Once you decide in favour of paying utility bills using credit card, have a look at the top credit cards best suited for utility bill payments:
|Credit Card||Annual Fee||Benefit on Utility Bill Payment|
|Axis ACE Credit Card||Rs. 499||5% cashback on bill pay and recharge via Google Pay|
|Citi Cashback Credit Card||Rs. 500||5% cashback on utility bill payments|
|Standard Chartered Super Value Titanium Credit Card||Rs. 750||5% cashback on fuel spends, phone recharges and utility bill payments|
|Standard Chartered Manhattan Platinum Credit Card||Rs. 999||3X Reward Points on Utility Bill Payments|
|SBI Card PRIME||Rs. 2,999||20 Reward Points per Rs.100 spent on standing instructions of Utility Bills payments|
|HDFC Bharat Credit Card||Rs. 500||5% cashback on utility bill payment|
Things to keep in mind when using credit cards for utility bill payment
Important things to keep in mind while using credit cards to pay utility bills
|USE THE RIGHT CREDIT CARD|
It is easier to make sure all your credit card bills are being paid on time if you use just one credit card. Choose the credit card that will help you earn the most rewards and one with the highest credit limit. The more credit cards you use for paying bills, the harder it becomes to track and manage the charges on all your credit cards.
WATCH YOUR SAVINGS / CURRENT ACCOUNT
Just because you are paying bills with your credit card, doesn’t mean you can splurge with the money in your current or savings account. Remember that you have to keep this money available so you can pay your credit card balance in full before the due date. That way, you will avoid debt and credit card interest.
AVOIDING CONVENIENCE FEES
Some companies charge a convenience fee on bill payment via credit card. Depending on the amount of the fee, you may not want to pay that bill with a credit card and use your bank account instead. These fees can add up and make your rewards-points-generating strategy less worthwhile.
Does it affect your Credit Score?
Paying utility bills using your credit card can either help or hurt your credit score, depending on how you use your card. Maxing out your credit card and missing credit card payments will hurt your credit score. Adding your bills on top of the purchases you have already made could bring you too close to your credit limit, which in turn could have a negative impact on your credit score. However, if you pay your bills on time each month and in full, it can help improve your credit score.
Paying some of your monthly bills with a credit card makes sense. The importance of paying off your credit card balance each month, however, cannot be overstated.
With careful planning and good judgment, you can pay many of your bills using your credit card. You can earn rewards, achieve that sign-up bonus and even get a little extra time to pay by putting monthly expenses on a credit card wherever it makes sense.