About 170 million Americans have a credit card. We use them to pay for groceries, split the tab at restaurants, and book vacations.
But what about rent?
Housing represents the largest monthly expense for almost all Americans. With so many cash back credit cards on the market, putting that cost onto your card may seem like an attractive option. To find out if that’s the case, we asked two financial experts if you should pay rent with a credit card.
Is it Possible to Pay Rent with a Credit Card?
For most people, yes.
“Many of the bigger rental companies do allow tenants to pay rent with credit cards,” says Michele Cagan, CPA and author of “Debt 101,” a book released earlier this year.
If your landlord accepts credit card payments, there will typically be a fee between 1% and 5% per transaction. So if your rent is $1,000, that means you could spend between $10 and $50 in fees per month, or up to $600 per year.
Smaller landlords generally don’t offer this option, Cagan says. But even if your landlord doesn’t use it, you can use a service like RentPad or Plastiq to pay rent with a credit card. With RentPad, you can pay rent with a credit or debit card, and they’ll mail the check to your landlord for a fee: $4.95-$9.95 per month for debit cards, and 2.99% for credit cards. With Plastiq, you can pay rent (or virtually any bill) for a 1%-2.85% fee. Then the company pays your rent with a check or ACH payment.
Should You Pay Rent with a Credit Card?
For most people, no.
“This is almost never a good idea for a regular practice,” Cagan says. “Even if you’re doing it to earn credit card points, the fees are usually bigger than the card rewards. “
Paying rent with your credit card can also throw off your credit score. Credit utilization ratio, the percentage of your allowed credit that you’re using, represents 30% of a FICO credit score. The less you charge to your credit card, the better you look to your credit card provider and scorer. If you regularly charge a large expense like rent, that will increase your credit utilization ratio and potentially lower your credit score.
One exception could be if you’re trying to reach a spend threshold for a rewards credit card, says Benét Wilson, senior credit cards editor for The Points Guy.
For example, some credit cards offer thousands of bonus points if you spend a certain amount of money during the first few months after opening the account. “You can do a lot with those points,” says Wilson. Getting to that spending threshold could be easier if you put rent on your credit card. The trick is looking at the overall cost—including fees and interest—and comparing it to the value of those points, says Wilson.
Make sure you’re paying off your credit card in full every month, otherwise you can end up in financial trouble. “If I’m paying rent with a credit card and something happens, like my car needs to be repaired, I would get behind in payments,” says Wilson. “In three months, I could owe almost $4,000 in rent, and if I don’t have a way to pay that, I’m paying a lot of interest on that car.”
Paying your rent with a credit means getting hit with transaction fees, potentially hurting your credit score, and risking high interest payments. There are only rare situations where that makes sense.
Instead, think of your credit card as an “emergency go-to,” says Cagan. If money is temporarily tight, it can work “as long as you are also paying down the credit card at the same time.”