Is It Worth The Cost
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Important Factors To Consider Before Paying Your Rent By Using A Credit Card
Some of the important factors that must be considered before you pay the rent by using a credit card are mentioned below:
- Impact on the Credit Score: Since the credit utilisation is increased by paying the rent with your credit score, this will have an impact on your credit score. The is an important factor to determine your credit score.
- Interest: In case the credit card bill is not paid in full, interest is levied on the outstanding balance. The interest that is levied will pile up over a period of time.
- Processing Fee: Banks generally charge a processing fee in case the rent payment is made via a credit card. The processing fee may vary between 2% and 4%. Hence, you will end up paying a higher amount.
It is important to consider various factors before you pay the rent by using a credit card. Paying the credit card bill in full is important as it will improve your credit score and history. High interest rates are also levied in case the credit card bill is not paid in full.
How To Pay Your Rent With A Credit Card
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Paying your rent with a credit card is a great way to earn reward points, build up your credit score, and avoid accidental late fees. Depending on who your landlord is, the payment process may be quick and simple or somewhat complicated.
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The Cost To Your Credit Score
“Credit scoring models will punish you as well if your balance eats up too much of your credit limit,” Ulzheimer says.
This means there could be a spike in your , which is the ratio of how much credit you’ve used to how much is available a very important factor lenders use when determining your credit score. While experts recommend keeping your utilization rate below 30%, it’s worth noting that a monthly rent payment could easily exceed this 30% maximum depending on what your total credit limit is.
Consider a scenario where your monthly rent costs $1,000 and the credit card you are using to pay for it has a limit of $5,000 that’s already using 20% of your credit just covering rent. Other everyday expenses you charge on the card will easily add up over the month to 30% or higher.
For this reason, it may be worth it to first ask your lender for a before charging rent onto your card.
Alternatives To Paying Rent With A Credit Card
If you dont have a credit card : or you do, but arent keen on adding a hefty processing fee to your already:expensive rent bill : there are several additional payment methods that will get the job done. For starters, the third:party payment apps listed above all work for debit cards as well. The fees for those are typically cheaper than those for credit cards . Or, you could use one of these methods:
- Do a bank wire transfer
- Use a debit card
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Pros Of Paying Rent With A Credit Card:
- Earn Rewards : Paying your rent with a rewards credit card will allow you to boost your earnings with a big expense each month. Such large charges will also be extremely useful when it comes to meeting the initial spending requirement to qualify for a rewards bonus. Just make sure any fees youre charged for paying rent with plastic dont outweigh the perks of doing so.
- Convenience : Maybe you wont be in town the week rent is due or youre not able to get to the leasing office during business hours. Paying with a credit card by phone or online offers the convenience and flexibility that many other forms of payments lack.
- Safety Guarantees : Some third:party apps guarantee that your payment will reach the property manager on time and will cover any late fees or other costs associated with payment problems. After all, youre trusting them with the roof over your head. For example, here is RadPads guarantee below:
- Financial Coverage : It doesnt matter if youre short on money this month : your property manager will still want your rent. So, unless you have a willing friend or relative who can foot your bills in the meantime, using a credit card is your next best option : especially if you can pay it off in full during the grace period.
Qualify For A Welcome Bonus
You might consider paying rent with your credit card to earn a new cards introductory bonus, especially if you wouldnt qualify otherwise. For example, lets say youre approved for a credit card that offers a huge haul of bonus points after you spend $4,000 on purchases within the first three months of opening your account. If you charge $1,500 a month in rent payments to the card for those three months, youll end up spending a total of $4,500, which is more than enough to earn the intro bonus. Of course, youll need a solid plan to repay the balance before the due date each month to eliminate your debt and avoid costly interest charges.
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Why There’s A Fee To Process Credit Card Rent Payments
Even if you dont see the cost of using a credit card, merchants do.
Whenever you swipe your card at a grocery store, restaurant, or anywhere else, the merchant pays a fee to accept your payment. Usually, these fees are a small flat amount plus a percentage of the transaction.
What that means is that when you buy $100 worth of groceries, the store might only receive $97. The other $3 go towards companies like Visa and MasterCard that operate credit card payment networks.
When you get into large dollar amounts, which rent payments usually are, a small percentage of your rent payment is a lot of money.
If you pay $1,500 in rent each month, 3% of that amount would be $45.
Landlords dont want to give up that amount of money every month, so any landlord that accepts credit card payments will tack on a credit card payment fee.
You dont want to pay more for rent if you dont have to.
What makes paying rent with a credit card even more dangerous is the possibility of carrying a balance. If you dont pay your card off in full, youll have to pay interest on the balance you carry over.
With a balance from a large rent payment, the interest charge will be significant. You could set yourself up to enter a debt spiral that is difficult to escape.
Paying Your Rent Or Mortgage Directly From Your Credit Card
If using a third party doesnt appeal to you, there are other ways to pay rent or a mortgage with your credit card.
You may already be familiar with a credit card cash advance, where you can withdraw cash from your credit card using an ATM, at a bank branch or via a convenience check. While this may seem like the most straightforward way to pay rent with your credit card, its also one of the most expensive ways. The fee on a cash advance usually runs around 3% of the withdrawn amount. So, on a $1,500 rent payment that would mean paying an extra $45. Plus, interest accrues on cash advances immediately, and with cash advance rates at 21% or more, youll end up paying a lot more over the long run.
You can also pay your rent or mortgage indirectly with a balance transfer by first applying for a credit card with a low rate balance transfer offer. Once youre approved, you can move debt from another high-interest card to your balance transfer card. That will free up room to pay your rent on your other credit card using a cash advance or third-party service.
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Excellent Credit Cards For Paying Rent
If youre going to pay your rent with a credit card, you might as well get some points for it, right?!? Here are two credit cards with great welcome bonus offers you should consider:
Chase Sapphire Preferred Card The Chase Sapphire Preferred Card offers a 60,000 point signup bonus when you spend $4,000 in the first three months you have the card. These points are worth $750 in travel redemptions through the Chase portal or, you can transfer them to over a dozen loyalty program partners to get even more value. If youre new to earning points and miles, this is almost always the first card we recommend. Trust me, you wont be sorry. Learn how to apply.
Capital One Venture Rewards Card The Capital One Venture Rewards Card earns 2x miles on every purchase you make. Best of all, youll receive 60,000 value toward travel) after you spend $3,000 in the first three months. Since your miles are not subject to airline or hotel blackout dates, you can use them at any time. This is a really great card with some very versatile rewards. I definitely recommend it! Learn how to apply.
Is Paying Rent With A Credit Card Worth It
The value of being able to pay rent with a credit card ultimately depends on your goals and circumstances. While it could be a convenient way to earn more points through your credit card, you could end up paying hundreds of extra dollars in fees each year.
So before you sign up for any of these rental payment services, check the costs involved, work out how many points you could earn and then decide if paying rent with your credit card is worth it for you.
Want to earn points for your everyday spending? Compare rewards credit cards that offer points per $1 and introductory bonus point offers. Want to know what your rights are as a renter? Find out what your landlord can and can’t do.
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Why Should I Pay Rent With Credit Card
There are many benefits of paying your rent with a credit card, some of them are mentioned below:
- 45 Days of Free Credit Period: There are no credit charges within the first 45 days of paying the rent. However, if you pay your credit card bill before that, you wont attract any charges for that either
- Earn Reward Points on Credit Card: Your monthly rent can be a big amount and therefore, using your credit card to pay rent can attract reward points and cashback
- Improve your Credit Score: Using a credit card for paying rent regularly and paying the credit card bill on time can improve your credit score
- Meeting Your Annual Credit Spend Limit: A lot of credit card users face the problem of not being able to meet the annual spending limit of their credit cards. By paying the rent with your credit card, you can easily meet your annual spending limit.
Pay Rent Directly To Your Landlord
If your landlord accepts credit card payments, you can submit your payment directly. Many landlords, especially larger property management companies, have software set up to accept payments, either in-person or online.
Before you use your credit card to pay your rent, check with your landlord to find out if youll be on the hook for any fees. For example, if a payment service charges a 3 percent processing fee, your $1,500 rent payment will effectively become $1,545.
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Cost To Pay Rent Or A Mortgage With Credit Cards
Paying rent or a mortgage by cash or cheque has one big advantage. While you might have to walk it over to your buildings office or mail it, you wont have to pay any big fees. Using a credit card to pay rent or a mortgage will cost you extra.
- If you use a third-party payment service, youll likely be looking at credit card fees of 1% to 2.5%.
- If your landlord directly accepts credit cards, banks typically charge them a 2% to 3% fee for each transaction which theyll likely pass on to you.
As an example, if your rent is $1,000 per month and you pay with a credit card, you could pay an additional fee of $10 to $30.
Can You Pay Rent With Your Credit Card
Launched in the US towards the end of June, the Bilt Mastercard seems to be something of a game changer. While it can be used like any other credit card to cover everyday costs as needed, the major draw on this card is that it allows users to earn rewards on their rental payments, as they pay no transaction fees or annual fees.
How does that compare to paying rent with a credit card here in Australia? Firstly, there are no credit cards in Australia dedicated to the purpose of paying rent. Secondly, if you do want to pay rent with your credit card, you will likely pay a fee to a third-party payment processor for the privilege. On top of that fee, you will also pay an annual fee on your credit card.
If the main reason you want to pay rent with your credit card is to earn rewards, you will have to work out whether the points you earn on those payments are worth more than the amount you pay out in fees. With the right card and the right payment processor, it could work in your favour. And, you may enjoy other benefits along the way, such as building credit.
In this post, were going to look at the various third-party payment processors you can use to pay rent with your credit card, to then dig deeper into the pros and cons of choosing this option. From there, well get into how you can make the most of the arrangement, including how to avoid certain pitfalls, such as falling into debt and ruining your credit.
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The Cost: Watch Out For Interchange Fees
With all that said, some landlords will accept credit card payments. But beware: Remember the interchange fee the landlord needs to pay the credit card company? Many landlords will just pass that fee onto you, meaning you are now paying more for rent.
Typical interchange fees are about 2% to 3% of the transaction. So on a $1,500 rent payment, those fees would range from $30-$45 per month. Pretty hefty.
If you still want to pay rent via credit card, ask your landlord or check your lease to see if you can. Whether you choose to pay with a credit card or not, at least youll know your options.
More Options To Pay The Rent Via Credit Card
If your landlord doesnt accept credit card payments, you can still pay rent using one, and your landlord doesnt even need to know. How? By using one of several rent payment services. These carry costs of their own typically on par with those pesky interchange fees.
Heres a rundown on some of them to help you compare and make the best decision.
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Ideal Size Of An Emergency Fund
|3-6 months of essential expenses||12 months of expenses|
Most people base their emergency fund off of their monthly expenses.
A common rule of thumb is to keep between 3 and 6 months expenses in your emergency fund.
This amount will be enough to handle nearly any unexpected expense that might pop up, such as a medical bill or a car repair. It will also be enough to help you weather a period of joblessness.
Making monthly automatic transfers from your checking account is the best way to start building an emergency fund. Once youve built one, leave it as it is. If you ever use the money in it, do your best to replace it as quickly as you can.
Knowing that you have extra money available to help you deal with emergencies can help with your peace of mind. It also helps you avoid expensive debt or fees from paying your rent with a credit card.