Svetikd | E+ | Getty Images
Housing is usually one of many greatest bills in somebody’s funds, and it is pure to marvel about the easiest way to pay that invoice.
For renters, typically it is attainable to pay with a credit card. While you could earn rewards and build credit by doing so, consultants say it is sometimes not a good transfer.
“This is a very giant fee; it could rapidly spiral when it comes to further rate of interest prices,” mentioned Susan M. Wachter, a professor of actual property at The Wharton School of the University of Pennsylvania.
More from Personal Finance:
Many young unmarried couples don’t split costs equally
Here’s how Gen Zers can build credit before renting their own place
What to know to make rent payments count for credit
Your landlord won’t even agree to just accept fee by way of a credit card, as they might be topic to paying processing charges.
They merely “might not need the trouble,” mentioned Matt Schulz, senior credit analyst at LendingTree.
Here are three issues to think about earlier than you cost your rent fee to a credit card.
1. Processing charges chip away the rewards
An enchantment of paying your rent with credit could be incomes rewards on that expense. The typical money again card affords 1.5% to 2% again.
But most third-party fee providers and huge property administration corporations cost credit card processing or transaction charges. Those can run from 1% to three% of the rent cost.
“The price of that payment might eat into the worth of any rewards you would possibly earn, so it won’t even be price it,” mentioned Melissa Lambarena, a credit playing cards expert at NerdWallet.
The median house rent nationwide was $1,964 in January, according to Rent.com. That would generate practically $60 in month-to-month credit card processing charges, or greater than $700 over the course of a 12 months.
Make certain you overview the phrases earlier than you resolve which card to make use of. Processing charges differ, and there are some playing cards that don’t cost them, just like the Bilt Mastercard.
2. You run the chance of accumulating curiosity
If you don’t pay the cardboard steadiness in full by the tip of the assertion interval, you danger including curiosity fees on prime of your month-to-month rent.
“Don’t pay rent with a credit card if you’re going to be charged curiosity,” mentioned Ted Rossman, an business analyst at Bankrate.
Due to inflation, extra folks have been racking up and carrying debt, whether or not from credit playing cards or buy now, pay later loans. High rates of interest could make a few of these balances tougher to pay off.
The common rate of interest for all credit playing cards by the tip of 2023 was 21.47%, the very best APR because the Federal Reserve started monitoring in 1994, according to LendingTree.
3. Your credit rating might dip
Using credit playing cards for big transactions can affect your credit utilization rate, the ratio of debt to whole credit, which weighs closely into your credit rating, Lambarena defined.
“Putting rent in your card’s credit restrict could harm your credit rating,” she mentioned. “It’s often really helpful by consultants to not use greater than 30% of your quantity of accessible credit.”
If you need to put the rent fee in your card, a good buffer is to ensure you have sufficient out there steadiness. You can ask for a credit restrict improve out of your card issuer to attenuate the affect to your rating.