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, as well as the reasons 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.
Reasons You Might Need to Pay Rent with a Credit Card
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 not available, and you may find yourself facing steep overdraft fees in your bank account if you try to pay rent with a check anyway.
You Can’t Wait for Your Check to Get Cashed
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.
Emergencies and Unexpected Situations Arise
Another big reason many people resort to paying 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 have to take a trip to the emergency room or urgent care and find yourself facing a few hundred or thousand dollars in medical bills. Or, perhaps your car gets towed and you have to 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.
Pros and Cons of Paying Rent with a Credit Card
If you do find that it’s necessary to pay rent with your credit card, you should be aware of the given advantages and disadvantages.
Pro - Credit Card Rewards
One pro of paying 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 you have a great credit card, then you may find that paying rent with your credit card is actually a smart choice.
Pro - Credit Card Bonuses
One other way that paying 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 have to pay regardless, using your card to make this payment is actually a wise choice that pays off and rewards you.
Con - Fees
Fees are perhaps one of the biggest disadvantages to paying rent with credit cards, aside from the effect on your credit score. Many online rent payment services charge processing fees for the use of credit cards, and even a small processing fee is going to add up when applied to the cost of monthly rent.
For example, say you have a 2-bedroom apartment that costs $1,200 per month for rent. Apply a 3% processing fee to that payment, and you’re looking at $36 in fees! To do that one time, and if you can fit it within your credit limit, wouldn’t be so bad. But long term, this is not a practical option.
Con - Interest
Further, even if you pay rent with your credit card and earn credit card rewards or cashback for doing so, you’re probably going to have to pay interest. Interest on high-budget purchases like a rent payment can add up as well. When combined with payment processing fees, you end up paying a lot more over time.
Con - Effects on Credit Score
Lastly, paying rent with a credit card has a big effect on your credit score via the credit utilization ratio. This basically refers to the amount of your credit limit you have used (balance) in comparison to your entire credit limit.
Typically, it isn’t wise to use more than 60% of your credit limit at a given time. So, if you have, say, 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 are looking to improve it, paying rent with your credit card may not be the best idea.
How to Pay Rent with a Credit Card
At the end of the day, if you decide to pay rent with your credit card, then you need to be aware of your best options. Ensure that you know what processing fees you’ll face for paying in this manner. Further, make sure you are prepared to pay everything back in full to protect your credit score.
Keep Records of Interest and Fees
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 what percentage of fees you faced, as well as the interest rate your credit card is charging on the purchase. This way, when your credit card statement comes out, you know the extra cost you owe in interest.
A Good Alternative - The Personal Loan
If you find, however, that the cons outweigh the pros, there are practical alternatives to paying rent with a credit card. 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 in 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.
Our personal loans are offered with quick approval and easy online applications. You can get a loan between $200-$3,000 with a flexible repayment period in monthly installments. As long as 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.
Pros of Taking Out a Personal Loan to Pay Rent
Bluntly 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 really only consider this option if it’s your last resort or if you know that you will be back with sufficient employment and money soon.
Cons of Taking Out a Personal Loan to Pay Rent
Some cons of this alternative include:
- Accruing debt and increasing debt with loan interest rates
- It takes a long time to pay off loans (years even)
- Loans will affect your credit score if you miss payments, make them late, or only make minimum payments, depending on your terms
Overall, the cost of taking out loans is a big commitment - one that almost always ends up costing 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 other alternatives that suit your financial needs and competency, such as the short-term personal installment loan that you intend to pay off quickly. Or perhaps see if you can get help from family, friends, or government assistance before resorting to paying rent with credit.