Many people who possess credit find that at some point in their time renting, they may be short on cash. When push comes to shove, people genuinely want to know whether or not you can practically pay rent with your credit card.
In short, you technically can pay rent with a credit card, but most financial experts agree that you shouldn’t if you don’t have to. Today, we’ll discuss the practical reasons for needing credit to pay rent and why it’s not always the best idea. Further, we’ll dive into decent alternatives to using credit to pay rent, like taking out a personal loan.
Although it’s not the best financial decision and one that may negatively affect your credit score, there are valid reasons one might need to pay rent with their credit card. Sometimes, the cash is simply unavailable, and you may face steep overdraft fees in your bank account if you try to pay rent with a check anyway.
One of the reasons you might need to pay rent with your credit card is if you’re worried about the funds in your bank account. Sometimes, when waiting for a rent check to get cashed, you have other money moving in and out of your checking account.
If that money decreases too much before the rent check gets cashed, then you run the risk of your check bouncing. This may look like bad tenancy to your landlord or even result in the landlord’s late fees. Further, it may also affect your credit score in the long run if your bank accounts tie into your credit.
Another big reason many people resort to paying the rent with a credit card is that emergencies happen. You can’t expect the unexpected, and this is especially true with finances. Rent often takes up the largest portion of expenses for most individuals, and if an emergency arises, you probably aren’t going to be able to make that expense.
Perhaps you must take a trip to the emergency room or urgent care and face a few hundred or a thousand dollars in medical bills. Or, perhaps your car gets towed, and you must pay to get it back before you can do anything else.
These unexpected expenses can be costly, to say the least. If you can put your rent or a portion of it on your credit card to pay later, it may actually help you a lot.
If you find paying the rent with your credit card necessary, you should know the advantages and disadvantages.
One pro of paying the rent with credit cards is that some credit cards, although rare, actually offer their customers rewards for making purchases like rent. If you are in this boat and have a great credit card, you may find that paying the rent with your credit card is a smart choice.
Another way paying the rent with a credit card could work to your advantage is if you do so specifically to claim a credit card sign-up bonus. Some credit cards offer a bonus in their introductory period that you can only claim if you spend a large amount first.
Since rent is something you must pay regardless, using your card to make this payment is a wise choice that pays off and rewards you.
Aside from what it does to your credit score, one of the worst things about paying the rent with a credit card might be the fees you must pay. Many online rent payment services charge processing fees for using credit cards; even a small processing fee will add up when applied to the cost of monthly rent.
For example, say you have a 2-bedroom apartment that costs $1,200 monthly for rent. Apply a 3% processing fee to that payment, and you’re looking at $36 in fees! Doing that once wouldn't be so bad if you can fit it within your credit limit. But long term, this is not a practical option.
Further, even if you pay rent with your credit card and earn credit card rewards or cashback for doing so, you’ll probably have to pay interest. Interest on high-budget purchases like a rent payments can add up as well. You pay a lot more over time when combined with payment processing fees.
Lastly, the credit utilization ratio shows how much paying the rent with a credit card hurts your credit score. This is how much of your credit limit you have used (your balance) compared to how much your credit limit is.
Typically, using more than 60% of your credit limit at a given time isn't wise. So, if you have a $3,000 credit limit and have to use $1,800 of that for rent, you’re starting to look bad to credit bureaus.
If you want to ensure a good credit score or want to improve it, paying the rent with your credit card may not be the best idea.
Ultimately, if you decide to pay rent with your credit card, you must know your best options. Ensure that you know what processing fees you’ll face for paying in this manner. Furthermore, ensure you are prepared to pay everything back in full to protect your credit score.
When you make a rent payment via credit card, make sure to keep exact records of how much you spend. You also need to record the percentage of fees you faced and the interest rate your credit card charged on the purchase. This way, when your credit card statement comes out, you'll know the extra cost you owe in interest.
But if you find that the cons are more important than the pros, there are other ways to pay the rent that are more practical. While a personal loan is still a line of credit, it is a good place to start. This option is a good alternative for when you’re wanting to use credit to pay rent long-term. It’s also a good option when you have basically no other options.
For example, you have experienced a sudden loss of employment or can’t find a job, and unemployment benefits are just not cutting it. Maybe your current credit limit is too low to cover rent, and you can’t even apply to raise the limit. Know that a personal loan is expensive, too, but if it’s your last option, it can work.
Simple Fast Loans offers personal loans with quick approval and easy online applications. You can get a loan between $200 and $3,000 with a flexible repayment period in monthly installments. If you are 18 years old, have a valid photo ID and SSN, and live in one of the eligible states (Delaware, Utah, Texas, etc.), then you may be eligible for a personal installment loan to help you cover rent in a pinch.
Simply put, there really is only one pro to this alternative: it gets you the money you need while you need it. The long-term implications of a loan are severe, especially if you aren’t prepared to pay it off quickly. You should consider this option only if it’s your last resort or if you know you will return with sufficient employment and money soon.
Some cons of this alternative include:
Overall, taking out loans is a big commitment that almost always costs more than you borrowed in the first place. Before considering this option, see if it's possible that your landlord may be willing to be flexible or help you out. You could get a roommate, ask for a payment postponement, or even take on a part-time job to get by in the meantime.
All in all, it’s possible to pay rent with a credit card, but it isn't the best option for most people. Unless you have a great credit card with rent-payment rewards and intend on being wise with your credit card payments, paying rent this way quickly accrues fees, interest, and other baggage to your finances.
Consider alternatives that suit your financial needs and competency, such as the short-term personal installment loan you intend to pay off quickly. Or perhaps see if you can get help from family, friends, or government assistance before resorting to paying the rent with credit.