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Should I Pay My Rent with a Credit Card?

As money gets tight, you may find yourself in a situation where you can pay your rent with your credit card. This is increasingly becoming a more common option as more landlords offer the ability to use credit cards, Paypal, or Venmo.  Even if a renter has the cash to pay, there are sometimes reasons you’d want to use credit. And most apartment management and large property management companies like Utopia Management accept credit cards, even online, to make it easy for tenants to pay.  There are pros and cons to going this route.  Paying rent directly with a credit card can keep you with a roof under your head if you are short on cash. It can also be a wise choice if you are looking to protect yourself from fraud and benefit from certain rewards. Consider the following before making this decision to use your credit card for rent:

Rewards

There are plenty of rent payment services out there that give you the opportunity to use your credit card for payments, and even offer some incentives for going this route. If your credit card has a rewards program, this can be a fantastic way to boost earnings with this major expense as each month rolls by. These big charges are also very helpful if you are someone who must meet a spending requirement to earn the rewards bonus. Just be sure that any fees which may be charged to the card do not outweigh the bonuses with going this way.

Convenience

Another great perk of using a credit card to pay rent is how convenient it can be for both landlords and tenants. If there is a possibility you may not be in town that week, or if it slipped your mind that rent was due, the payment will still be charged regardless. Human error cannot affect an automatic payment each month. The flexibility this offers is unrivaled to using cash or check.

Safety

When using a credit card, there is a safety guarantee that other methods of payment cannot compare to. Using a credit card assures the tenant that they are streamlining their rent payment to their landlord almost instantaneously. Using this method will also save the tenant from having to pay any late fees or other cost-related problems with payment. Another perk is that your money is safe from any form of fraud. The safety this provides can be a deal-breaker for the landlord or tenant who needs peace of mind each month.

Coverage

Being financially covered is something tenants and landlords absolutely need. The tenant needs to make sure they are making their payments on time, and the landlord must be sure they are getting their money on time. A credit card guarantees that the money is coming in each month no matter if the tenant is short on cash or not. As a tenant, you will not have to worry about your landlord cashing the check two weeks after they receive the payment.

High Fees

Using your credit card for rent can come with some hefty fees. Most banks charge around 3% of the transaction. That is an astronomically high price you would be paying for convenience. For example, if your rent is $1,200 a month, the fee amounts to the tune of around $35 dollars. If you calculate that into a year, that is $420 extra annually.

Limited Credit

Paying for rent using credit can be a very bad idea for tenants who have limited or terrible credit. This translates to the tenant having a very low spending limit on the card if they own one, so this option would not even be available for tenants that fall into this category. It is important to thoroughly screen prospecting tenants before allowing them to live in your property. If this precaution is not taken seriously, as a landlord you can lose tons of money. Having the ability to pay rent via credit could be useful for someone who wants to improve their credit, but there is always risk involved, either way.

Credit Ratio

The high cost of a rent payment can have negative consequences on your utilization ratio and lower your credit score. It is to be noted that people with limited or bad credit are prone to being affected by this more. To put it in numbers; if your credit limit is $4,000 and you are paying $2,000 on rent, you will have spent 50% of your monthly limit on housing alone. This can put you in danger of lowering your credit because you would be putting too much money on the card each month.

Paying rent with a credit card is possible, although it might be a lot harder than it had seemed. This method proves to be very complicated financially and much more expensive than other methods.

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