Should you be using credit to pay off housing rents and is it the right option for you?
As our society moves closer and closer to a cashless economy, paying in cash has started to feel like a hassle for many people. When you can buy a new appliance with the click of a button or pay for your morning coffee with a wave of your smartphone, actually coming up with a stack of bills or filling out a check just feels archaic.
If you don’t have to do that on a regular basis, you’re probably not a renter. Most landlords still expect a check in the mail or an envelope full of cash every month, and that doesn’t appear to be changing any time soon. So what options exist for someone looking to pay their rent with a credit card?
How to Pay Rent With a Credit Card
Some landlords, especially large property management companies, have an online portal where you can pay rent with a credit card instead of a bank account. Almost all landlords will require that the tenant pay a credit card processing fee, usually between 2.5 to 3%.
Smaller companies and individual landlords usually do not offer this method. If you still want to use a credit card, you’ll have to sign up for a third-party service.
Here are some of the most popular options to help you pay rent with a credit card:
To pay rent with Plastiq, you have to create an account, enter the landlord’s address and the cost of rent. Plastiq will then charge your card that amount plus the 2.85% fee.
If your rent is $1,000 a month, for instance, Plastiq will charge $1,028.50 in total to your credit card. Plastiq will send the rent money as a check or a direct bank deposit to your landlord’s account. Your landlord does not have to create their own Plastiq account to receive the money.
You can schedule recurring monthly payments through Plastiq so you’re not scrambling to send rent every month.
Plastiq also offers expedited payment options if rent is due in a couple of days. These come with extra fees on top of the 2.85% credit card processing fee.
RadPad works similarly to Plastiq. You create an account, enter the landlord’s address and total rent payment, and the app will mail a check before your rent is due.
Your landlord does not need a RadPad account to receive payments. RadPad charges a 2.99% processing fee, slightly higher than Plastiq.
Unlike Plastiq, RadPad also allows roommates to make payments separately and have it sent as one check. RadPad works with Visa, MasterCard, Discover, American Express and Apple Pay credit cards.
You can pay rent with a credit card through Venmo if your landlord uses the app. You’ll need to link your credit card to the Venmo account. When sending money to your landlord, choose to pay with the credit card.
Venmo charges a 3% fee to pay with a card instead of a bank account. A $1,000 rent payment would cost $30 in fees, for example. Your landlord also needs to accept Venmo as a viable payment method.
Benefits of Paying Rent With a Credit Card
Because paying rent with a credit card comes with extra fees, you should only do it under certain circumstances.
To Get Credit Card Rewards
If you need to spend a certain amount to receive a large credit card sign-up bonus, using a credit card to pay for rent may be a smart choice. Charges from services like Plastiq will count toward the minimum spend.
This strategy is probably better than buying something you don’t need just to earn the sign-up bonus. Make sure to calculate how much the sign-up bonus is worth and how much you’ll pay in fees.
For example, lets imagine a credit card that offers a 50,000-point sign-up bonus if you spend $3,000 in the first three months. Those points are worth $500 in travel purchases.
If you use the card to pay your $750 monthly rent, you’ll pay about $67.50 in fees. That still leaves you with a net profit of $432.50. Ka-ching!
To Avoid Taking Out a Loan
If your bank account balance is low and your rent is due, paying with a credit card could help you pay on time and avoid a late charge from your landlord. The fee from a provider could be less than the late fee, especially if you earn any rewards from your credit card provider.
In some circumstances, you may be better off using a credit card to pay rent than relying on a short-term loan like a payday loan. After all, credit cards have lower interest rates than payday loans.
For example, if your rent is $500, you would pay about $15 in credit card processing fees. You can avoid paying credit card interest if you repay the credit card bill in full. If you take out a payday loan, you’ll owe between $50 to $150 in fees on average.
Rental Kharma adds rent payments only to your TransUnion and Equifax credit reports, but not your Experian report. It costs $50 to get started, which includes six months’ worth of reporting and $8.95 per month going forward.
Rock the Score also reports payments to TransUnion and Equifax. They charge a $25 initiation fee and $8.95 a month after that, which comes out to about the same cost as Rental Kharma.
Another option for is to open a secured credit card. You can find a card with no annual fee, so boosting your score requires no extra spending. You can also take out a credit builder loan, which will also have lower fees than a rent reporting service.
The last option, if you don’t want to use a credit card or a 3rd party service, is to ask your landlord to report rent on your credit report, but it’s up to them to do the legwork. This is a stretch as most tenants do not demand for this service, and hence having landlords forward your payment history and reliability to the credit bureaus is unlikely.
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Zina Kumok has written for outlets such as Investopedia, Credit Karma, and Learnvest. Her expertise has been featured in Glamour, BBC, and Nerdwallet.
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