Can you pay rent with a credit card? You can, but perhaps a better question is whether you should. There are some excellent advantages to paying rent with a credit card, but this is an area where you need to be careful.
You need to understand the repercussions if you decide to use a credit card for rent, especially if you are going to do it on a regular basis. Make sure you understand the terms of both your credit card and your rental agreement, so you can balance the advantages with the disadvantages to see which one is better.
How to Pay Rent with a Credit Card
There are several ways to make rent payments with a credit card, whether or not your landlord specifically encourages it.
An Online Account Through Your Landlord
You may have a landlord who has already put into place a system that allows you to make credit card payments. In that case, you will probably need to set up an online account and pay through a portal. You can probably store your information so you don’t have to enter it every time.
RadPad
RadPad is another service that will process your credit card and pay your rent for a 2.99% fee. They take the service to a new level, though, by also helping customers to find a new place to live.
Plastiq
Plastiq is handy to know about because it allows you to make credit card payments at places that normally don’t allow credit card payments. For a flat 2.5% fee, you can pay virtually any bills with a credit card, even taxes. All you need to do is set up an online account and provide information on the payee and the credit card you plan to use. The person you pay doesn’t need to have a Plastiq account, and will receive a check or bank transfer as payment.
Place
Not just another way to pay bills, Place lets you use your credit card or bank account to schedule payments, get reminders, and manage your accounts. It’s easy to set up and there are Apps available on GooglePlay and at the AppStore.
RentTrack
RentTrack allows you to pay your rent and then report it to the credit bureaus so you can build your credit at the same time. This system is also easy to use. There is a $9.95 subscription fee and there are also fees that may be charged depending on factors such as whether your landlord has asked you to use this system for payment.
An Important Caveat
If you decide to use one of these to pay your rent with a credit card, make sure the transaction is not processed as a cash advance. Cash advances are usually handled differentlyby your credit card company, and will incur much higher fees. To add insult to injury, credit card companies will also usually start charging interest on the transaction as soon as it is processed instead of after the monthly bill comes due.
Disadvantages
The biggest problem is the cost you may incur, but there are other possible disadvantages.
Fees
Whether you are paying through your landlord’s own online portal or though another system, you can rack up an astronomical amount in fees. You may get charged a flat fee, but you are more likely to get charged a percentage of your total rent. Considering that rent is probably already your biggest living expense, that adds up quickly to a large sum of money.
Interest Fees
If you don’t pay off your credit card bill in full, you will pay interest fees on any amount left over. You definitely don’t want to get into the habit of paying your rent with a credit card because you can’t afford your monthly rent. If you find that happening, you need to make a different plan.
Your Credit Score
Even if you pay off your credit card every month, your credit score could still be affected negatively. One factor in determining your credit score is how much you owe at any given time compared to how much you have available to borrow. The large amount of a rent payment could make you look more reckless than you really are.
Advantages
While there are fewer overall benefits, you may be able to work them to offset the negatives.
Convenience
Unfortunately, many people don’t make it past this first consideration. Convenience isn’t something to sneeze at, because there’s nothing wrong with having an easier life.
When you use your credit card to pay rent, you can process the transactions in seconds without leaving the comfort of your home. You will log in to an online account where you can transfer the funds quickly and receive proof that you have paid through an email you can save. With some of the payment systems, you can even set up the payments so they happen automatically.
Credit Card Incentives
If you qualify, you can get a credit card with great rates and incentives. Some credit cards don’t charge fees for the first year or so, and then offer extra incentives on top of that.
Some cards offer specific rewards, like gift cards or other items. Other cards offer store credit or even cash back rewards. If you have a good enough deal, you can come out ahead when you use a credit card to pay your rent.
Building Credit
Most landlords don’t report rent payments to the credit bureaus on a regular basis. For people who don’t have a credit history, that can be problematic. The only way to get credit is to use credit, and it can be difficult to qualify for a home or auto loan later without a credit history.
Using a credit card will ensure that the payments show up on your credit history. RentTrack even allows you to report your rent payments if you don’t specifically use a credit card to make your rent payments.
Weighing the Pluses Against the Minuses
It can be easy to act on impulse when it comes to money issues. This is a decision that could have long-term repercussions, though, and should not be taken lightly.
For most people, the benefits of paying with rent with a credit card won’t be able to overcome the expense. Even if the expense is acceptable, you should consider the effect on your credit score if you plan on using your credit to take out a loan for a home or a vehicle.
Never be afraid of asking questions, and don’t worry about appearing too cautious. Make financial decisions you are comfortable with.
Dana George-Berberich is a freelance reporter and novelist. She has written finance articles for newspapers across the country and for companies like Dun & Bradstreet and Bankrate.
