Credit cards are a convenient way to pay for commodities. They can save you the hassle of writing checks or carrying around cash.
With digital wallets and bank cards on the rise, people can prefer to make both large and small payments with their credit cards.
However, not everything can or should be paid for with a credit card. Here’s what you need to know if you’re considering using credit cards to pay rent.
How to Pay Rent with a Credit Card?
Paying the rent with your credit card is possible and is a method utilized by many. There are two ways that you can use a credit card to pay rent.
1. Direct Payment
You can directly pay your rent using your credit card if your landlord accepts this payment method. However, there are often merchant processing fees that range from 2.5% to 2.9% that are involved if your landlord accepts credit card payments. This fee is usually transferred to the rent payer, who must pay their rent plus additional fees.
Some landlords and large property management companies have software and third-party services to accept rent through credit cards. If this is the case, then there may be service fees that you can be charged, in addition to your rent.
2. Third-Party Services
You can use third-party services to pay rent to your landlord directly. Some of these require your landlord’s involvement, while others can be used to make direct payments to your landlord.
These services include popular payment platforms such as Venmo, PayPal, Rentmoola, Plastiq and Placepay. However, a service fee, typically ranging from 2.9% to 3%, is charged for the process.
Pros of Paying Rent with a Credit Card
As digital payments have slowly taken over cash payments, many people prefer using their credit cards to make large payments such as rent. Here are some key benefits of using your credit card to pay rent:
- You have the convenience of automated or manual payments directly to your landlord.
- You can earn credit card rewards.
- You can take advantage of possible introductory bonuses offered by credit card companies.
- You can use a credit card during times you are strapped for cash.
Cons of Paying Rent with a Credit Card
Using your credit card to pay rent is convenient and quick, but it has some drawbacks. If you do not consider these factors, you can negatively impact your credit scores. Here are some cons of using a credit card to pay rent:
- You are likely to accumulate significant debt if you cannot pay off your credit card balance before it goes into the subsequent billing cycle.
- You might have to pay additional fees, in addition to the rent that you are paying. Over time, these additional fees accumulate to become a significant amount of money you are paying for a service.
- You risk negatively affecting your credit since paying the rent with your credit card affects the credit utilization ratio. It is essential to check your credit utilization ratio as it accounts for 30% of your credit score.
- You run the risk of maxing out your credit card quickly.
Using a rental credit reporting service can help you track your credit scores and help you work toward your credit goals as you continue to make rent payments through your card.