Alternatives to Paying Household Bills on Credit | Prepaid365

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1 April 2014
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One in five people are paying their household bills using credit cards, according to a recent poll looking into consumer habits.

Those doing so are adding surcharges and potential interest charges to their bills, meaning a number of households are paying even more for their energy.

Some 21% revealed that they used this method of payment when questioned by TotallyMoney.com.

Covering essential costs

Of that figure, more than half – around 3.4 million people – said they used their credit cards to pay for their electricity and gas.

Furthermore, around 6.5% pay their council tax on a credit card while 4.3% do likewise for their water bills, according to the poll.

Many providers charge around 2% on credit card payments – adding £29 to an average council tax bill, £24 to the average energy bill and £8 to average water bills.

Chief executive of TotallyMoney.com, Will Becker, described the move as a “clear sign of financial distress” but did add that paying with a card is a “far better option” than some others that are available.

“In effect, paying bills in this way is a self-inflicted price hike as the addition of surcharges and potential interest charges are just adding to household costs,” he explained.

Keeping additional costs down

He warned against missing payments or turning to more expensive sources such as payday loans or unauthorised overdrafts.

Some 2% of those questioned – around one million people – used a loan of some sort to cover housing costs.

An alternative would be to pay bills with the use of a prepaid card, in order to control the spending on household costs every month.

Only funds on the card can be spent, removing the chance of entering debt, while they can be topped up to ensure funding is available to cover bills.

Careful budgeting

Around 5% of the 2,000 people questioned as part of the survey also used a credit card to pay off their mortgage, according to OnePoll who assisted with the survey.

Given the rising numbers of people who are opting to borrow money in order to cover essential bills, the importance of good financial management is highlighted again.

Setting money aside for the essentials such as rent, food and energy is key and it is why a prepaid card could give greater control, if a certain level of funds were added to it each month to cover bills.

Cards like this are also not directly linked to a bank account, so the chances of fraud are dramatically reduced.

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