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Credit cards certainly come in handy for making day-to-day purchases, whether you want to rack up reward points or cover expenses until your next paycheck arrives. But not all transactions can be made with plastic, and it's common for landlords to refuse them for rent payments. There are some third-party services that allow rent payments via credit card, but consider the pros and cons first.
Can I Pay Rent With a Credit Card?
Many individual landlords and property managers will only allow tenants to cover their rent with either cash or check payments. They often refuse to accept credit cards due to the fees involved or the hassle of collecting and processing credit card payments—or they may simply prefer the reliability of cold hard cash. If your landlord is a large property management company, they might offer the option to pay by card.
Landlords who do accept direct credit card payments have to pay merchant processing fees for the privilege, and it's common for them to pass those fees on to the renters on top of rent. The convenience fee for paying rent with a card typically ranges from 2.5% to 2.9%, which may sound small, but it adds up. Say you pay $1,400 a month for rent and the processing fee is 2.5%; that means an extra $35 is tacked onto the payment. Over a year, that adds up to $420—about 30% of a single month's rent payment. Using a credit card that earns rewards could help you recoup some of this cost, but it's not likely you'll be able to wipe it out entirely.
If your landlord doesn't accept credit cards, you might be able to pay with one through a third-party online service that then pays your landlord. These services could help you build credit by reporting your payments, and if you set up autopay, you can avoid late payments—but they'll charge a fee. For example, the third-party service Plastiq charges a 2.85% fee on every rent payment.
Pros and Cons of Paying Rent With a Credit Card
Paying rent with plastic has several potential benefits:
- Earn rewards. One compelling reason to pay rent with a credit card is to earn travel, cash back or other credit card rewards. Base cash back rewards usually range from 1% to 2%, so if you pay $1,400 in rent on your card, you could earn $14 to $28 in cash back each month. Depending on the processing fees, however, rewards alone probably won't be enough to justify paying with your card.
- Take advantage of an intro bonus. Some renters might want to put rent on a credit card to take advantage of a card's intro bonus, which could be hard to earn otherwise. Let's say you're approved for a card that gives you a $500 bonus if you spend $5,000 within the first three months you have it. You could go a long way toward scoring that bonus if you put $1,400 a month in rent payments on that card over the three-month bonus period (a total of $4,200). Proceed with caution, however. Don't charge huge rent payments to your credit card without a plan to pay down the balance immediately so it doesn't linger as debt. Payments that large also risk spiking your credit utilization, which is a big factor in your credit scores.
- Cover expenses. If you're strapped for cash, paying rent with a credit card can help you get through a tight spot and preserve cash for other expenses. However, borrowing to cover rent should be viewed as a last resort option for emergencies, as it could turn into a bad habit, especially if you let your balance roll over to the next billing period and accrue costly interest. If you've already done everything you can to reduce expenses and increase your income, however, paying your rent with a credit card could be a viable stop-gap option to prevent missed rent payments and eviction. The APR on credit cards is also lower than some other borrowing emergency borrowing options, such as payday loans.
Despite these potential perks, paying rent with a credit card can have major downsides:
- Pay costly fees. The processing fee charged by payment processing companies could be sizable and add to your financial burden or wipe out any credit card rewards you receive.
- Increase your credit utilization ratio. This ratio shows how much of your available credit you're using at any given time, and it's the second most important factor in your credit scores. The lower your ratio, the better, but it's smart to at least keep the overall utilization ratio and the ratio on each card below 30%. Going above that percentage can cause greater harm to your credit scores.
- Risk maxing out. Regularly putting large rent payments, especially if you don't pay them off quickly, could result in maxing out a credit card. Not only would this prevent you from using it for other purchases, but it will have negative credit score consequences.
What to Do if You Can't Pay Your Rent
If paying rent with a credit card isn't an option for you and you're struggling to cover the expense, you have alternatives, such as:
- Seek assistance with rent if you are out of work and struggling to make payments. Check with your landlord as well as with local government agencies, charities or nonprofit aid groups to see whether they can help. For more information, visit the Consumer Financial Protection Bureau website, 211.org or FindHelp.org.
- Get a roommate to reduce rent costs.
- Consider relocating to a cheaper residence or area if you can afford to move.
- Find out whether your landlord offers bonuses for referring new tenants, and look for someone who wants to rent in your complex.
- Barter with your landlord to do repairs or other labor in exchange for a rent reduction.
- Borrow money from relatives or friends.
- Move in with family or friends, at least temporarily.
- Tweak your budget to ensure you've got enough money to cover rent each month, or create a budget if you don't already have one.
Other Ways to Give Your Credit a Lift
If you were hoping to pay rent with a credit card to help build credit history, but you can't stomach the fees, there are other strategies. For example, keep your credit card balances low, pay all your bills on time each month and sign up for Experian Boost®ø—a free way to count certain utility payments toward your credit score.
Another option is using a service such as RentTrack that reports your on-time rent payments to the three major credit bureaus. Rent payments aren't typically reported to credit bureaus, and using a service that does report them could help build a positive history and lift your credit scores (as long as you pay on time).