Ask an Expert: Do Any Cards Offer Bonus Cash Back on Utilities?

This post comes from Jason Bushey, who writes about credit cards daily on Creditnet.com.

I recently received this question from a Money Talks News reader:

I like to put my monthly utility bills on my credit cards. Do any credit cards offer bonus cash back for utility expenses? – Juan R.

My response

First, let me say that Juan is a smart guy for putting his monthly utility bills on his credit card. I always recommend using credit cards for monthly purchases you plan on making anyway, rather than expenses that would otherwise be considered outside of your monthly budget if it weren’t for your credit card.

No purchases are considered more “monthly” than your utility bills. Gas, electric and water are the monthly necessities that (usually) offer automatic bill pay so that you never forget to pay, and the bill often comes on the same day of every month.

Paying those bills with your credit card thus offers an opportunity to build a good credit history. As FICO explains on its website, 35 percent of your credit score is based on your payment history. Setting up automatic bill pay with your card ensures that you’re using your card and gives you the opportunity to make an on-time credit card payment each month. Another plus: You’re consolidating the number of bills you need to remember to pay off each month.

Even better than organizing and consolidating your monthly bills is earning cash back on those utility expenses. Many cards offer 1 percent cash back on all purchases, which is nice enough but won’t amount to much cash back solely earned by utility expenses. Other rewards cards, however, offer 2 percent or more depending on the utility bill.

For instance, the Barclaycard Rewards MasterCard offers two points per dollar spent on utilities, gas and groceries. This offer is available for both the excellent-credit and average-credit card offers.

Depending on whether you consider your phone a utility purchase (you would be hard-pressed to say it’s not a necessity at the very least), the SimplyCash Business Credit Card from American Express offers a full 5 percent cash back on wireless telephone services purchased directly from a U.S. service provider, up to $12,000 per year.

One catch

Before consumers set up autopay with one of their cash-back or bonus cash-back cards, it’s important to find out whether the service provider in question charges a convenience fee for credit card payments.

Obviously, a convenience fee of 1 percent or more will negate the cash back earned using a credit card. You might consider this a worthwhile trade-off because using your card for utility purchases will help you build a good credit score if you pay your credit card bill on time every month. But if it costs more to use your credit card for utility purchases even after the rewards, it’s probably not worth it.

In conclusion

There aren’t very many cash-back cards that provide extra rewards when you use it for utility payments, which is too bad because utility bills must be paid each and every month. That said, using any rewards card to pay your monthly bills can help you in more ways than one, provided there are no convenience fees.

Even setting up autopay on utility bills with a 1 percent cash-back card can help you accrue a little bit of cash back, build credit and perhaps even better organize your monthly spending.

Note: While we attempt to be completely objective when reporting on credit cards, this site may be compensated by issuers when a reader applies for a credit card through the links within credit card stories or on our credit card search page. Also note that any terms, rates or other features described in this article can change without notice. Always double-check everything with the issuer before applying for any credit card.

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Comments & discussion

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  • I.Popoff

    I belong to an electric and water cooperative and unfortunately they won’t do automatic payments from a credit card due to the processing fee. I was able to set up automatic payment from my checking account though.