Umair Gaines
Utility companies, including electric companies, often require new customers to undergo credit checks to determine their bill payment history and whether they can approve their application. This is because utility companies are providing services before receiving payment, essentially extending credit to the customer. While some utility companies accept credit card payments, others may charge a convenience fee or outsource payments to a third party, which can charge a higher fee. This is likely to recover the cost of processing that a business must pay the credit card company.
| Characteristics | Values |
|---|---|
| Scammers asking for credit card information | They may ask for your credit card number, bank account information, or your social security number. |
| How to identify scammers | They want you to "enroll" for a lower energy rate or buy specific products from them. They may insist on unconventional payment methods such as prepaid debit or credit cards, gift cards, wire transfers, money orders, or cash. |
| How to avoid scams | Ask for photo identification, check for company-issued clothing, and be cautious of door-to-door salespeople. Verify the company's online presence and whether they offer services in your area. |
| Legitimate companies asking for credit card information | Legitimate companies may ask for your Social Security number to check your credit history. |
| Reasons for not accepting credit cards | Electric companies may not accept credit cards due to the cost of processing fees and the challenge of recovering these costs from customers. |
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What You'll Learn
Electric company scams
Phone Scams
Phone scammers often pretend to be from your local utility company or energy provider. They may insist that you are behind on your electricity bill payments and threaten to shut off your electricity or gas supply immediately unless you pay up. They may even leave a callback number, replicating the phone number of your energy provider, and ask for your credit card number, bank account information, or social security number. Remember, real utility companies will not shut off your service without prior written notice, and they will not ask for unconventional payment methods such as wire transfers, money orders, prepaid cards, or cryptocurrency. If you receive such a call, hang up and contact your utility company directly using the number on your bill or their website.
Door-to-Door Scams
Scammers may also show up at your door, claiming to be affiliated with a utility company. They often work in pairs and use various excuses to gain personal information or access to your home. They may ask for your utility bill, supposedly to check if you're getting the best rate, or they may try to distract you while their accomplice robs your home. Legitimate utility company employees will always carry a permit and wear branded clothing. They will not ask you to write down sensitive information and will provide printed materials with energy plans and rates. If you're unsure, ask for their employee number and then contact the company to verify their identity.
Online Scams
Scammers may also target you through email, text messaging, or social media. They may promote a non-existent "special federal program" that can help pay your utility bills and ask for sensitive information, such as social security numbers, leading to identity theft. Always be cautious when providing personal information online and verify the legitimacy of any programs or offers by contacting the utility company directly.
Remember, it's important to stay vigilant and protect yourself from these scams. If you encounter a suspected scam, report it to the local authorities and the utility company to help raise awareness and prevent others from falling victim.
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How to avoid scams
Electric companies may not ask for your credit card information for a few reasons. Firstly, they may want to avoid the cost of processing that a business must pay to the credit card company. By accepting other payment methods such as cheques or direct debits, they can bypass these costs. Secondly, credit card companies do not like it when credit card users are charged differently from non-credit users, and they may threaten to stop accepting payments.
Regardless, it is important to be vigilant and know how to avoid scams when it comes to sharing your credit card information. Here are some ways to protect yourself:
- Be cautious of unsolicited messages or calls: If you receive an unsolicited message or call from someone claiming to be from a company you do business with, such as your credit card issuer or bank, do not provide any personal or financial information. Instead, contact the company directly using the phone number or email address listed on their official website.
- Verify the legitimacy of websites: Before entering your credit card information on a website, ensure that it is legitimate and secure. Look for signs of security such as an https URL and a padlock symbol. Be wary of websites that only accept payment methods that are difficult to reverse, like wire transfers or cryptocurrency.
- Monitor your credit card activity: Regularly review your credit card statements and set up alerts to detect any suspicious activity. This will help you identify any unauthorised charges and allow you to take prompt action to protect yourself from further fraud.
- Be wary of extreme urgency: Scammers often create a sense of urgency to pressure you into acting quickly without thinking. Be cautious of offers that are only available for a limited time or requests for immediate payment. Legitimate companies usually provide a reasonable timeframe for you to consider their offers.
- Avoid providing sensitive information: Do not give out your credit card number, security code, or personal information in response to unsolicited requests. This includes emails, texts, or phone calls that you did not initiate. If you are unsure, contact the company directly using a verified phone number or email address to inquire about the legitimacy of the request.
- Be cautious of public Wi-Fi: Avoid using public Wi-Fi networks to conduct sensitive activities, such as online banking or shopping. Scammers can monitor these networks to steal your credit card information or infect your device with malware.
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Legitimate companies and credit card safety
Electric companies, as well as other legitimate companies, may not ask for your credit card information for a few reasons. Firstly, they may want to avoid the cost of processing fees that businesses must pay to credit card companies. Secondly, credit card companies do not like it when credit card users are charged differently from non-credit users, and they may threaten to stop accepting payments. This can be worked around by outsourcing payments to a third party, but this often comes with an even larger fee.
Legitimate companies will also not ask you to write down any sensitive information, such as your credit card number or social security number. If someone claiming to be from a legitimate company asks for this information, be wary as they may be trying to scam you. To avoid this, you should always verify the legitimacy of the company and the request by, for example, asking the person for their employee number, searching the name of the company online, and checking if the company offers services in your area.
It is important to note that data breaches are becoming more common, especially on retail websites. As such, it is crucial to take steps to secure your sensitive information and not store your credit card information on merchant websites or web browsers. If a company suffers a breach and you have stored your credit card information with them, your credit card information could be stolen and sold on the dark web.
To protect your credit card information from malware-based attacks, keep your computer and antivirus software up to date, avoid clicking on suspicious links or downloading unknown attachments, and use two-factor authentication whenever possible. Additionally, be cautious when receiving voice calls, emails, or other messages from people claiming to be from legitimate companies, as vishing and phishing are common methods used by scammers to obtain personal information.
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Credit card fees
These processing fees are typically between 1.5% to 4% of the total value of the transaction. For example, a $1000 transaction could incur fees ranging from $15 to $40. The impact of these fees depends on the merchant's margins. If the total profit on a transaction is $40, then a credit card processing fee of the same amount could eat up all the profit.
To avoid these costs, some businesses, like electric companies, may choose not to accept credit card payments. Instead, they may offer alternatives such as cheque or direct debit payments, which do not incur the same processing fees. In some cases, regulators have allowed companies to recover credit card fees by including them in the utility bills of their customers.
Credit card users should also be aware of the various fees associated with owning a credit card. These fees are outlined in the cardholder agreement and can include annual fees, late payment fees, foreign transaction fees, balance transfer fees, and cash advance fees. Annual fees typically range from $95 to upwards of $500, although some cards may waive this fee for the first year. Late payment fees can be up to $8 for the first instance and up to $40 for subsequent violations within six billing cycles. Foreign transactions may incur an additional fee of around 3% per transaction, while balance transfers and cash advances typically range from 3% to 5% of the transaction amount.
To minimize these fees, credit card users can opt for cards with no annual fees, no late fees, or no foreign transaction fees. Additionally, they can avoid balance transfer fees by choosing cards with no balance transfer fees and opt for borrowing from alternative sources instead of incurring cash advance fees.
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Credit checks and history
A credit score is a number derived from a credit history, with each credit bureau using its own algorithm to calculate a score, typically ranging from 300 to 850. Positive information, such as paying bills on time and maintaining low credit card balances, contributes to a higher credit score. Conversely, negative information, such as late payments or high credit card debt, can lower the score and lead to a negative credit rating.
Credit checks are commonly performed by lenders when individuals or businesses apply for credit, loans, insurance, or other financial services. The information in a credit report helps lenders assess an applicant's creditworthiness and ability to repay debts. A negative credit rating often results in less favourable loan terms or higher interest rates. Credit checks may also be conducted by employers, especially for positions involving financial management or access to sensitive data. While a credit check for employment does not reveal an individual's credit score, it provides a modified credit report with information on debt, payment history, and financial behaviour.
It is important to note that individuals can check their own credit reports without negatively impacting their creditworthiness. This is known as a "consumer disclosure" inquiry. Additionally, credit counselling agencies can obtain a client's credit report with no adverse action, providing support to those building or repairing their credit history. Understanding credit checks and history is crucial for making informed financial decisions and maintaining a positive credit profile.
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Frequently asked questions
Electric companies usually avoid asking for credit card information due to the cost of processing that a business must pay to the credit card company. If you pay by check or direct debit, the power company does not incur these costs.
Scammers often insist that you pay by wiring money, using cryptocurrency, using a payment app, or by putting money on a gift card. They may also ask to see your bill immediately, claiming they need the information to fix an account issue. An electric utility worker will not need to enter your residence to perform work, and they will be wearing company-issued clothing with the company logo.
Utility companies can look at your credit history, so they may ask for your Social Security number. They may also ask for a copy of your electric bill to gauge your usage, but they should be fine with a fully redacted bill.
