If you’re good at managing your finances and you like to earn points, miles or cash back when you spend, you’re likely relying on your credit card to make your purchases, at least most of the time. This means you’re handing over your plastic to get everything from groceries and gas for the car to paying your insurance and even your taxes. What about when it comes time to pay your rent? More than likely, you’re mailing a check when the first of the month rolls around. But it is possible to pay rent with a credit card? Yes, but there are some caveats. Here’s how you can pay rent with a credit card.
1. Talk With Your Landlord
First up, you need to talk with your landlord to see if they currently allow (or would consider allowing) credit card rent payments. If you feel strongly about wanting to pay by credit card, it may be a good idea to come prepared to the conversation with how this payment method could benefit your landlord. For example, having tenants pay their rent with a credit card allows for more flexibility (payments can be made from anywhere) and the landlord doesn’t have to go to the bank to collect on the payment. It may also increase the odds that everyone pays on time, assuming they set up automatic bill pay with their credit card. You may also mention that this will eliminate the concern of checks getting lost or delayed in the mail.
2. Find Out About Fees
Whether you’re paying your landlord directly with a credit card, or using an alternative third-party service to do so, it’s important you find out what other fees may be affiliated with the payment as well as who is expected to pay them.
For example, if your landlord accepts your payment using Square Cash or PayPal, you may have to pay a transaction fee. If they use an online rent payment platform like RentPayment, there will be a service fee. If you have roommates and are using a service like RentShare that allows you to divvy up payments between each of you, ultimately transferring the full amount to your landlord, there’s a fee of 2.99% of your monthly rent.
If you are responsible for covering these charges, you’re, in turn, increasing your monthly rent, so it’s important to factor this into your budget and decide if paying rent with your credit card is worth it.
3. Make Sure You Pay on Time & In Full
If you’re comfortable paying any fees your landlord won’t cover, and still want to pay your rent with a credit card, you need to make sure you have the funds to cover the charge you place on your plastic so your rent doesn’t land you in credit card debt (or add to your rent because of interest charges).
“I would caution people about putting rent on a credit card if they are planning to set it on auto pay and carry the balances,” Bruce McClary, the vice president of communications for the National Foundation for Credit Counseling, said.
Having your bill set to auto pay isn’t a bad thing, as long as you’re responsible about it. The trouble is the potential of not paying your credit card statement in full or on time, as this “might lead to credit limits that are maxed out and minimum payments that become unaffordable. Those circumstances can inflict significant damage on a credit score,” McClary said. (You can find out how your payment history is affecting your credit by viewing two of your credit scores for free on Credit.com.)
However, if you pay your rent (and, in turn, credit card) on time, you can really have a positive effect on your credit, as payment history makes up the largest portion of your credit scores (35%). McClary also pointed out that, “if managed effectively, [paying rent with a credit card] can provide an opportunity for accrual of reward points and other cardholder benefits while serving as a convenient way to manage a recurring expense.”
4. Consider Using a Rewards Credit Card
It may make even more sense to pay your rent with a rewards credit card, as doing so could help you rack up some perks from an expense you’d already be paying anyway. If this is the route you opt to go, it’s a good idea to comparison shop first, so you can find the credit card that is right for you. And remember: Most reward credit cards require good or excellent credit, so you’ll want to know where your credit stands before applying so you don’t get hit with a hard inquiry and lower your scores, just to ultimately get denied for the new plastic.
5. Other Things to Think About Before Paying Rent With a Credit Card
Keep in mind that, just like you have to think about the fees that would come with using a service to pay your rent with a credit card, it’s also important to consider any credit card fees you’d have. For example, many rewards credit cards carry an annual fee. If this is out of your budget, getting the new plastic won’t be worth it. It’s also typically best practice to not carry a balance on these cards — otherwise, all the great rewards you’d earn would be lost to interest payments.
It’s also a good idea to evaluate your credit utilization ratio before deciding to pay rent with a credit card. Adding a large charge, like your rent, could harm your credit in the process, as it may use up too much of your available credit limit. Keep in mind, balances may show up on your credit report, even if you pay all your charges off in full every month, since issuers tend to report balances to the credit bureaus as of your statement billing date and not your actual due date. For best results, aim to pay off any big charges before that billing date. Generally, to have the best effect on your credit scores, experts recommend keeping your credit card balances below 30% (ideally 10%) of your total available credit limit.