Your rent payment is probably a big chunk of your spending each month. So it might be tempting to put it on your credit card to earn extra points. But when it comes to charging your rent, generally the cons outnumber the pros.
What are the benefits of paying rent with a credit card?
The main benefit of paying rent with a credit card is racking up the associated points. But do the math before you pull the trigger: Since credit card processing fees are 2.5% or 3% of the amount you're charging, you will need to earn rewards points that are worth even more to justify using a card. Plus, since the value of points generally depends on how you use them, you should figure out a plan before you go the credit card route.
A major expenditure like rent can also help you meet a credit card’s spending requirement in order to claim a sign-up bonus. (For example, the Chase Sapphire Reserve card requires you to spend $4,000 in your first three months in order to get 50,000 bonus points.)
Paying rent with a credit card can also help you manage cash flow, since control when money leaves your bank account. For example, if your rent is due on the first of the month—but you don't get paid for another week—you can use your credit card, then wait until your paycheck clears to settle the bill.
Are there any downsides to paying rent with a credit card?
One word: fees. You’ll pay a processing fee of 2.5-3% each time you use your credit card to pay rent. So, if your rent is $1,800 a month, then you're actually paying $1,854 in rent. If it's $950, then you're actually paying $979, and if it's $3,100, then you're actually paying $3,193.
Another downside is the negative impact it could have on your credit. Remember that your credit score will decrease when your balance on your card increases. This is also known as credit utilization, and it's a major factor in determining your overall credit score. You run the risk of seeing your score go down when you charge big amounts to your card.
You can avoid this by paying your credit card bill soon after using it for rent and being responsible with other credit card spending.
So, should I pay rent with my credit card?
To sum it all up, there are three major justifications for charging your rent:
- You need to meet a hefty spending requirement for a new card
- Your rewards points are higher than the credit card fees
- Cash is tight, and it's your only option
If none of these scenarios apply to you, paying your rent with a card could ding your credit score and subject you to unnecessary processing fees.
How else can I pay rent online?
Most people who pay rent online do so with a debit card or ACH payment. Even if your landlord isn’t set up for online payments, your bank may offer something called "bill pay" that allows you to set up recurring automated payments. Then, the bank will automatically issue and mail a check to your landlord each month.
The information provided on this website does not, and is not intended to, constitute legal advice.