Earning cash back on utilities
Quick insights
- Many credit cards offer cash back rewards for utility bill payments, providing an opportunity to save on these regular expenses.
- Using credit cards for utility payments can potentially earn rewards, but it also carries the risk of interest charges and credit score impact if balances are not paid in full.
- Some Chase credit cards offer rewards for utility payments, making them a useful option for managing these expenses.
Did you know that paying your utility bills can be more than just a monthly chore? With the right credit card, it can also be a source of cash back rewards. Let's shed some light on how you can turn your bills into benefits.
Can you earn cash back for paying utility bills?
The short answer is yes, potentially. Many credit cards offer specific reward structures for utility payments, typically ranging from 1% to 5% cash back. Other credit cards might not specify earning rates for utilities but still include them as a viable option for their base earn rate.
Utilities such as electricity, gas, water, phone, cable and internet services can potentially qualify for cash back rewards. Chase credit cards like the Chase Freedom Unlimited® and Chase Freedom Flex® offer rewards on all purchases, including utilities, with the Freedom Unlimited earning 1.5% cash back on all purchases.
Pros and cons of paying utility bills with a credit card
There are a number of potential benefits and drawbacks to consider when deciding whether to pay your utility bills with a credit card. Let’s take a look:
Pros
- Reward accumulation: Credit card payments can allow you to earn points, miles or cash back that can be used towards travel, products or statement credits.
- Convenience: You can automate payments and consolidate all utility expenses into one bill.
- Credit score: Automating utilities payments with your credit card could prevent you from missing payments and establish a good payment history, which can potentially help improve your credit score.
Cons
- Potential fees: Some utility companies charge convenience fees for credit card payments.
- Debt risk: If not budgeted properly, mismanagement can lead to high interest charges if balances aren't paid in full.
- Credit score: While using a credit card to help you establish a good payment history could potentially help improve your credit score, a poor payment history could similarly harm your credit score.
Which Chase credit cards are best for paying utility bills?
While Chase doesn’t have a credit card that provides a permanent enhanced earning rate on utilities, the Chase Freedom credit cards allow you to earn rewards on utilities. Let’s take a closer look:
- Chase Freedom Unlimited: The Chase Freedom Unlimited card earns at least 1.5% cash back on all purchases, including utilities.
- Chase Freedom Flex: The Chase Freedom Flex card earns at least 1% cash back on all purchases, including utilities, but it also features rotating bonus categories that change every quarter, and these can potentially include utilities like phone, internet, cable or other utilities. Like the Freedom Unlimited, Freedom Flex also comes with a low annual fee.
Understanding credit card terms related to utility payments
There are some key terms that can help make credit cards a bit easier to understand and navigate. Here are five that are relevant when using credit cards for utility payments:
- Interest rates: Your card’s interest rate, typically referred to its annual percentage rate (APR), is important to consider if you carry a balance, as the interest can negate any rewards earned.
- Grace periods: Knowing your card's grace period can help avoid interest charges by paying the balance in full and on time.
- Credit utilization: High utility bills can affect your credit score if they lead to high credit utilization ratios. Your credit utilization ratio is the percentage of your total credit limit that is currently occupied by debt, and it is generally recommended to keep your credit utilization ratio at or below 30%.
- Credit score: Your credit score is a three-digit number that represents your creditworthiness, based on your credit history. Many different factors can potentially impact your credit score in positive or negative ways. For instance, high credit card balances can negatively impact your credit score, while regular, on-time payments can help improve it.
- Annual fees: Some credit cards charge an annual fee, which can offset the benefits of rewards unless you earn enough to cover the cost.
Additional tips for managing utility expenses with credit cards
You may be able to effectively manage utility expenses by taking a strategic approach with your credit card(s). Here are some tips to help you get the most out of your credit card payments:
- Budget management: Keep track of credit card spending on utilities to avoid overspending and accumulating debt.
- Reward optimization: Regularly review your card's rewards program for any changes to ensure you are still getting the best returns on your utility payments. For example, if the Chase Freedom Flex card offers an enhanced earn rate or one or more utilities for a quarter, it might be prudent to activate that reward and pay as much of your utilities as possible with that card during that period.
- Fee awareness: Be aware of any potential fees charged by your utility provider for credit card payments. If these fees outweigh the rewards, it may not be beneficial to use your credit card for these payments.
- Payment automation: Setting up automatic payments can help ensure you don’t miss bill payments and continue to earn rewards.
- Card choice: Using a dedicated rewards card for utility payments can potentially help you maximize cash back or points.
- Regular card review: Credit card offers and reward structures can change. Regularly review your card terms and consider if a different card might offer better rewards for your utility payments.
The bottom line
Using credit cards to pay for utility bills can be a smart financial strategy if managed properly. It offers convenience and the potential to earn rewards. However, it's important to be aware of any additional fees and the potential impact on your credit score. Choosing the right card can maximize your benefits when paying utility bills.
