Paying your rent on a credit card can hurt your credit score—here’s the only time you should really do it

Select ’ s editorial team works independently to review fiscal products and write articles we think our readers will find useful. We earn a commission from consort partners on many offers, but not all offers on Select are from affiliate partners. The comfort of charging your monthly rent to a credit card without having to mail in a check is highly appealing. And if you are a tenant who uses direct deposition to submit your monthly requital, you may have thought about how you could accelerate your cash back, points or miles by using your citation circuit board alternatively. Paying with fictile may seem like a commodious alternative — but while there are ways to do it, it ‘s not for everyone. similar to charging a big expense like college tuition on a credit card, there is most probable a processing fee associated with it that offsets any rewards you may earn.

“ If you have no early way to keep a ceiling over your headway, then using a tease could buy you a few months to get back on your feet financially, ” fiscal technical John Ulzheimer, once of FICO and Equifax, tells Select. But ultimately, “ using a card to pay rend or a mortgage, to the extent your lender or landlord allows you to do so, has pros and cons. ” It should only be done when you ‘re about certain the benefits will work in your favor. Below, Select breaks down what to think about before paying your rent on a credit card — and the only time you very should do it .

Charging your rent usually means paying extra fees

The best shell scenario would be if your landlord or property management party accepts credit cards without a fee attached to each transaction, but this is very rare ; if they do accept credit, you ‘ll most probably have to cover the cost of the transaction fee. If your landlord does n’t accept credit cards, your moment option would be to use an on-line bill payment service, but these are costly. Plastiq, a popular choice for renters, applies a flat 2.5 % tip to every payment and PayPal Checkout charges a 2.9 % work tip, plus $ .30 per transaction .

Do the rewards you earn surpass the cost of the extra fees?

Processing fees for charging your rent on a credit card are normally between 2.5 % to 2.9 %, which means if your monthly rent is $ 1,471 ( the 2019 national average ) and you are charged a 2.5 % serve tip, you would pay an extra $ 36.78 every time you use your card to pay rend ; that ‘s an extra $ 441.36 for swiping over the entire year. Any rewards you may have earned through your credit menu may at that compass point be negated, particularly if your credit circuit board came with an annual tip .

The only time you should pay your rent on a credit card

“ To the extent you are using a circuit board and gain rewards, if you can pay your balance in full moon each month then at least you ‘re getting some palpable benefit of paying with plastic, ” Ulzheimer says. In early words, you should only pay your rent with a credit batting order if both of the follow conditions are true :

  1. You’re certain that the value of your rewards exceeds what you pay in processing fees; and
  2. Your monthly budget includes paying your balance in full before your grace period ends

Since march fees are then standard for most payment portals, the one time you ‘re most likely to earn more in rewards than you pay in fees is if you use a recognition menu with a good sign-up bonus.

One case is with the Chase Sapphire Preferred® Card, which offers newfangled cardmembers 60,000 bonus points if they spend $ 4,000 in the first three months ( worth up to $ 750 toward travel when you redeem through Chase Ultimate Rewards® ). Since most bonus offers require goodly spending upfront, charging a hefty rend charge can help you reach that big spend prerequisite in a timely way. But do n’t make it a habit once the 3-month scar is over. “ The downside is that you ‘ll basically be making a major buy on your card every month, ” Ulzheimer says. “ If you fall into the habit of just making the minimum payment your card will probable max out reasonably cursorily. ”

The cost to your credit score

“ credit score models will punish you american samoa well if your counterweight eats up besides much of your credit limit, ” Ulzheimer says. This means there could be a spike in your credit utilization rate, which is the proportion of how much credit you ‘ve used to how much is available — a very important factor lenders use when determining your credit score. While experts recommend keeping your utilization rate below 30 %, it ‘s deserving noting that a monthly rip requital could well exceed this 30 % maximum depending on what your entire credit rating limit is. Consider a scenario where your monthly economic rent costs $ 1,000 and the credit wag you are using to pay for it has a limit of $ 5,000 ; that ‘s already using 20 % of your credit just covering rent. early casual expenses you charge on the calling card will easily add up over the month to 30 % or higher. For this rationality, it may be worth it to inaugural ask your lender for a credit limit increase before charging rent onto your poster .

Bottom line

even though recognition cards can offer appliance when paying your monthly rent, there ‘s in truth entirely one clock time you should use them for this purpose. If you want to meet a minimum spend on a new credit menu and plan to pay off the symmetry in full right aside so you are n’t charged interest, it could be a reinforce path. otherwise, it ‘s hard to earn more in rewards than you spend on the gamey march fees with each monthly requital. The exception to this would be if you are in a crimp one month and motivation to use a citation card as an hand brake accompaniment. even then, you would need to make sure you can pay off your balance in fully during your following charge cycle so it does n’t backfire and this debt does n’t linger, racking up interest fees. And if you already ca n’t afford to pay your recognition card balance in full every calendar month, it ‘s probably not a bright idea to start charging rent on top of it ampere well.

“ ultimately, paying your economic rent or mortgage the traditional manner, from bank account funds, is still the safest option, ” Ulzheimer says. Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff ’ south alone, and have not been reviewed, approved or differently endorsed by any third party .

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Category : Finance

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