Rent statistics show that roughly 108.5 million Americans — a third of the American population — rent their residence. If you’re one of them, you are likely familiar with the fact that you need to make rent payments to your landlord or property management company every month.
At some point, you may have wondered, “Can you pay rent with a credit card?” And, even if you can — should you?
In this article, we’re here to answer those questions. Below, you’ll find a definitive guide to paying rent with a credit card, including the pros and cons of doing so. We’ll also cover what you can do if you’ve charged rent that led to credit card debt.
Can you pay rent with a credit card?
In short, yes — it’s entirely possible to pay rent with a credit card. Some property managers use apps and services like Cozy, which is a payment service that allows renters to pay monthly rent via:
- Debit card
- Credit card
- Direct deposit through a bank account
If your property manager does not use a service like Cozy, you may need to seek out a third-party service to process the payment. For instance, if your property manager collects rent via check , you could use a service like Plastiq, which allows you to pay by credit card.
Plastiq then sends the payment to your property management company via paper check or ACH.
Should you pay rent with a credit card?
You should pay rent with a credit card only if you have to. Below are some of the primary pros and cons associated with paying rent using a credit card.
Pros of paying rent with a credit card
Here are some pros associated with charging your monthly rent to a credit card.
Build your credit through timely payments
Should you pay your credit card balance in full every month and on time, you can build your credit score. If you don’t have a mortgage or car payment, putting rent on a card is a good way to demonstrate to credit bureaus that you can be trusted to borrow money.
A history of timely payments will quickly boost your credit score. If you have a low score, charging your rent could build your score so that it’s high enough to take out additional funding for a mortgage.
Take advantage of rewards credit cards
If you earn cash back or travel rewards on your credit card, then it may be worthwhile to charge your rent each month. Charging your rent can also be helpful if you’ve opened a new card with a sign-up bonus. For instance, your new card may have a spending requirement that says if you spend $5,000 in the first three months, you’ll receive a $500 statement credit.
You may not be able to spend $5,000 without charging your rent. But, doing so would give you $500 back, effectively reducing your rent for those three months.
Make all of your payments on time
Has this ever happened to you? The first of the month creeps up on you, and you forget that your rent is due. To avoid missing a rent payment, you can set it up so that your credit card is charged automatically each month. You don’t need to worry about writing paper checks or transferring money to your property manager.
Cons of paying rent with a credit card
While there are some benefits to charging your rent payment, there are also numerous downsides. Here are the primary disadvantages of charging your monthly rent.
Pay processing fees
One of the biggest downsides to paying rent with a credit card is the extra fees. Any third-party service that accepts credit card payments for rent will charge you a processing fee, typically ranging between 2% and 3%. Plastiq, for instance, charge a 2.85% fee. Cozy charges a 2.5% fee.
Let’s say that your rent is $1,250 per month, and you use Plastiq to process a credit card payment to your landlord. The 2.85% fee equals $35.63. This means that your monthly rent payment is now $1,285.63. Spread this out over the year, and you’re paying about $427 extra in credit card fees.
As mentioned previously, you can use a rewards card to pay rent. But, you’ll want to consider if the rewards outweigh the cost of the processing fees. For instance, if a credit card offers 2% cash back but the processing fee is 2.5%, the transaction will end up costing you money.
Impact your available credit
Your credit utilization ratio makes up 30% of your FICO credit score. Your credit utilization ratio is a reflection of the total amount of credit you’ve used versus your total available credit. Financial experts recommend that you keep your credit utilization ratio below 30% if you don’t want to negatively impact your credit score.
Depending on your credit limit, charging your monthly rent could quickly send you over this threshold. By charging monthly rent and maintaining high balances, you may end up lowering your credit score.
Risk not being able to pay your credit card balance
There is not a lot of flexibility with credit card due dates. Each month, you need to make the minimum payment on the balance to avoid late fees and interest-rate increases.
To avoid interest, you can pay your balance in full every month. But if you’re unable to pay your balance in full, the credit card company will begin charging interest.
Since rent tends to be a large payment, charging it to a credit card may make your balance too high to pay in full. This could lead to interest charges and credit card debt.
What can you do if you’ve accumulated credit card debt from rent payments?
If you charged rent to a credit card and have since begun accumulating high-interest debt, be sure to check out Tally. Tally is a credit card payoff app that helps you pay down your balances in the most efficient way possible, avoiding future interest charges and late fees.
Tally takes control of your personal finances. It automatically makes the minimum monthly payment on all of your credit cards and then pays down debt in the most strategic way possible. Doing so can:
- Improve your credit score
- Increase your available credit
- Decrease your credit utilization
By paying down debt quickly, you save money in the long term on interest. Tally is an excellent option to reverse course if you started charging your monthly rent payments to your credit card and fell behind on payments.
Paying rent with a credit card — is it for you?
There are more than 100 million renters in America. At some point in time, each one of them has probably wondered, “Can you pay rent with a credit card?”
The short answer, of course, is yes. Some property managers make it easier than others, but it’s ultimately possible to pay using a card. But that doesn’t necessarily mean that you should. Paying rent on a credit card is only beneficial if you’re able to pay your balance in full every month to avoid debt. By paying in full, you can take advantage of credit card rewards while building your credit.
However, there are disadvantages to be aware of as well. You may have to pay processing fees, or a high credit utilization ratio could harm your credit score. Also, you may incur interest charges or late fees if you can’t pay your credit card balance in full or on time.
Should you begin charging rent to your credit card and start accumulating debt, be sure to check out Tally. Tally can help manage your debt and pay it down quickly, freeing up cash for future opportunities.