Payment of utility bills using credit card: How good an idea is it?

Updated: Tuesday, April 15, 2014, 18:30 [IST]

Other than the conventional modes of making utility bill payments, the use of credit card for the purpose is widely being promoted by banks. But should you be making the payment via credit card is the question. Here are listed few of the arguments in favour of as well as against the use of credit card for utility bill payment.

Process of utility bill payment with a credit card

When proceeding to make utility bill payment using a credit card you have to first create a login account with the bank and thereafter add or register the billers provided in the bank's list. Remember for availing the service, the particular biller to whom you wish to make the payment must be included in the bank's list. Utility service providers of telephone, direct-to-home (DTH), electricity, gas, insurance and other services are all included in the bank's list.

At the time of making the payment, you have to select the service provider or the biller and provide some of the details including your customer ID number and the amount of payment. Thereafter, you need to check the payment option for automatic payment to the utility service provider using the credit card. You can also give a standing instruction in respect of the payment which shall be charged to your credit card later as and when the payment gets credited in the account of the service provider.

Arguments in favour of utility bill payment using a credit card

Convenience is the main reason why people opt to make utility bill payment via credit card. Apart from it several banks provide reward points as well as cash-back offers in case the payment is tendered using the credit card. Also, some of the credit card issuing company give few extra reward points which can be exchanged for gifts or gift vouchers. Know why credit card reward points go unredeemed.

Arguments against the use of credit card to make utility bill payment

Some of the banks charge a transaction fee for utility bill payment transaction using a credit card. The fee can vary from bank to bank and is generally charged in the range of Rs. 10-25 for each of the transaction. Nonetheless, such transaction fee is not charged in case the payment is made using either a debit card or via an ECS facility availed from the bank for the purpose. Utility service providers are also charged some percentage as fees by banks.

Reward points and cash back offers promoted by banks for the use of credit card for utility bill payment are very small. Considering the case when your bank gives you 1 reward point for every Rs. 100 spent then when you make your telephone bill payment of Rs. 1000, you earn 10 points and if each reward point is worth 50 paise, you'll realize merely Rs. 5 for the transaction. Redemption of reward points is also not free as banks charge a handling fee in the range of Rs. 25 to Rs. 100.

The cash back offers are also limited in respect of both the amount as well as validity time. Usually ranging between 5-10% of the total bill amount and pegged at a maximum of Rs.100 to Rs. 200 per billing cycle, such offers are to be availed within a limited period of say three to six months.

So, though the convenience factor when making utility bill payment through credit card cannot be neglected, the associated cost outweighs the different incentives. And hence it shall be wise to use other available modes to effect the transaction.

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