Prepaying utilities?
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My local utility (BG&E) allows for a budget payment option that allows for consistent monthly bills. From time to time this results in a credit on the account depending on the time of year. This credit earns 0.5% interest per month, which by my math translates to an 6% APR. Any reason I couldn’t just prepay a large amount and earn that interest? Thoughts?
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I like it. Too bad my power company does budget billing, but no interest on it. Try it and report back. There might be a upper threshold were they either send the money back, or stop paying interest above that
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Ime utilities don’t estimate well. After 6mos I got an additional bill for hundreds due at once.
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@zapjb I had a very similar experience the first year. It has definitely leveled out since then.
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Aren’t they only going to pay interest to the extent that the level payment amount charged exceeds the amount you would have been billed had you not been on the level payment plan? If so, pre-paying isn’t going to help you.
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@david-scubadiver That’s what I was wondering. Historically the interest was on any amount that was considered “credit” over the previous 12 months.
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I prepaid my cable internet with the AXP sync offer of 10% off on up to $300. I got $90 credits after using three cards with the offer and have noted it on my calendar when all my credits are used up. The opportunity cost I “lost” in this case is losing the bonus on a 5x card but since the $30 credits came up higher than what I’ll earn from UR, I chose the AXP sync offer.
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This will work if you have discipline. However, people like me will see a huge credit on the water/electricity bill and then decide I am rich enough to flush the toilet (and use the electricity-consuming fan) more often than I do when I am feeling frugal. If you maintain your typical money-saving habits, then I say go for it. But if you are like me, you will just end up wasting the credit on your bill by flushing the toilet each and every time you go potty (and wasting money using the bathroom fan/light when you want to see what you are doing or make it stink, as well).
