Like most Americans, you probably use your credit card on a daily basis for life’s common purchases — groceries, gasoline, movie tickets, and the like. Would you ever consider to pay rent with a credit card? Currently, credit cards account for over $1 trillion of the total $13 trillion in American debt.
Few people think twice about charging a Netflix subscription or a small online purchase. Rent is a big monthly expense many people would never even consider putting on plastic. For a good number of people, paying rent with a credit card is a terrible idea that can lead down a path toward financial ruin. In some cases, it could be a wise move to leverage a credit card company’s funding for your monthly rent.
Let’s look at some reasons why paying rent with a credit card might be a good or bad decision.
Reasons to Pay Rent with a Credit Card
Though it is uncommon for people to pay their rent with a credit card, it does happen. In fact, online companies including Plastiq, RedPad, and RentShare can facilitate your rent payment for a small fee, mind you. Your landlord or apartment complex may have its own system similar to these third-party vendors. And if you’re in any of the situations listed below, that fee for using these payment processors could be worth it.
If you’re not using a credit card that offers some sort of rewards, why not? For every purchase you make, a little money comes back to you in the form of a cash rebate, airline miles, hotel points, gift cards, or some other perk.
In most cases, these rewards are not worth changing your spending habits. Rather, they’re just a nice little benefit to compel you to pull out a particular card each time you pay. Most rewards are worth two percent or less. Fees charged for paying rent with a credit card are often around three percent. So for many people, this makes paying rent with a credit card a non-starter. If you happen to find a credit card rewards program that pays you more than the rent payment fee, you’ll come out ahead.
Some rewards programs require new cardholders to spend a certain amount quickly in order to receive a sign-up bonus. Paying rent could be an easy way to reach the amount threshold, and the initial reward could be so large that it outstrips the rent payment fee.
Perhaps your credit score has taken a few hits, and you need to prove your creditworthiness with an installment loan. One way to do that is by using credit responsibly. Don’t spend money just to spend money; that isn’t going to help you. A solution to your problem may be to pay your monthly necessities — like rent and utilities — with a credit card. Pay the credit card bills promptly, and you’ll be well on your way to a higher credit score.
Coverage in a Short-Term Pinch
Sometimes money is tight, and timing is everything. Maybe rent is due on the 1st of the month, and your next paycheck doesn’t come until the 15th. Paying rent with a credit card can help cover your expenses when you know money is just around the corner. If this is the reason you’re paying rent with credit, it is important not to make it a habit. As quickly as you can, get your finances in order so you don’t have to rely on the credit card to pull you through the month.
Reasons Not to Pay Rent with a Credit Card
Deciding to pay your landlord with your credit card is a choice you shouldn’t take lightly. And there are some very important reasons to stick with checks, debit cards, or ACH transactions. Here are some of the big ones.
Again, processing rent payments by credit card are rarely free. Whether your landlord has a payment system or you use a separate online service, you’ll pay a small fee for the convenience of using your line of credit. If you’re able to use another method of payment that doesn’t incur these fees, that other way may be better for you.
Using Too Much of Your Credit Line
How much of your available credit you use is a significant factor in your credit score. A good rule of thumb is to keep your credit utilization at no more than 30 percent. So if you have a credit limit of $15,000, you should use no more than $4,500. If you use too much credit, this negatively impacts your credit score thus garnering you a higher interest rate on a mortgage and other loans.
Throwing Your Budget Out of Whack
Just about every landlord under the sun wants you to pay your rent within the first five days of the month. Some are bigger sticklers about it than others, but no landlord wants to be paid late. When you use a credit card to pay rent you, in essence, shift the rent’s effective due date. Yes, you’ve satisfied the landlord, but you still have to pay the credit card bill. Eventually, the bill comes due, and you’re stuck paying your landlord at the beginning of the month and the credit card company sometime else in the month. Now, your budget is thrown off, and you have to somehow get back on schedule. Doing so is very difficult if you live paycheck to paycheck.
When you pay your credit card bill on time and in full every month, the arrangement is essentially a series of free, short-term loans. If you don’t pay off the bill each month, you accrue interest you have to pay for the privilege of borrowing the credit card company’s money. The last thing you want to do with a credit card is accrue interest on one of life’s necessities such as rent, and even worse would be to allow interest to capitalize on the credit card debt. If you are unable to catch up to your credit card debt, follow this 6 step guide.
A Few Words of Caution
Credit cards are a wonderful modern convenience, but they’re also a fast way to get yourself in a financial hole. Before you pay rent with a credit card, take the time to analyze whether this method of payment is beneficial for you and make sure you understand exactly how credit cards work. If it is, and you can maintain control of your finances, go for it! If not, the best thing to do is stick with cash for your living expenses.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.