Can you pay the rent with a credit card?
If your finances have been hit hard and you’re unsure where you’ll find the money to pay this month’s rent, it’s important you know this: is possible to pay the rent with a credit card. Before doing so, however, make sure you understand how it works, how much it can cost, and what your alternatives are.
Can I pay my rent with a credit card?
There may be several reasons why you want to pay rent with a credit card. Maybe times are tough and you don’t have the funds in the bank. Maybe you are just hoping to score tons of credit card reward points.
The short answer to the question “can you pay rent with a credit card” is yes, but paying rent with a credit card is not ideal. For this reason, we will cover a few alternatives below.
The process may not be as straightforward as handing over a credit card. Not all owners accept credit cards. Even if your landlord is firmly in the ‘don’t accept credit card’ camp, you can use a third-party payment service like Plastiq to pay by card.
Along with dozens of its competitors, Plastiq allows consumers to pay by credit card for things that usually can’t be billed, like rent. Plastiq charges an average transaction fee of 2.85%. If your rent is $ 1,000 per month, paying it through Plastiq would cost an additional $ 28.50.
What about a cash advance? It is a terrible idea. The average cost to take out a cash advance is 5%. If your monthly rent is $ 1,000, the cash advance fee would be $ 50. Additionally, the average interest rate on a cash advance is 23.68%. To add insult to injury, there is no grace period – you would immediately start paying interest on that money.
Be careful when deciding whether or not to pay the rent with a credit card. As the interest on your debt accumulates, you will quickly be heading into dangerous financial territory. That’s why credit cards aren’t necessarily the best way to pay rent.
Homeowners’ reluctance to accept credit cards
Americans have been asking for years, “Can you pay the rent with a credit card?” And for years, the response from most homeowners has been, “Absolutely not.
In fairness, homeowners who decline credit card payments have legitimate concerns, including:
- An angry tenant can pay rent and then dispute the transaction. If that tenant can convince their credit card company that they haven’t approved the charge, the transaction can be rolled back and the landlord has nothing left.
- Credit card payments are not processed automatically. In fact, it can take days for a homeowner to receive payment.
- Transaction fees eat into an owner’s budget.
So the idea of paying rent by card has been limped around without ever really catching on. And then the pandemic struck.
As the coronavirus made its way across the world, businesses of all kinds have had to adapt. In April, with millions of Americans out of work, some homeowners began to emerge. Renters who couldn’t make ends meet were looking for other ways to cover their rent. And owners, sweating the thought of months without payment, have been looking for ways to enable credit card transactions.
What happens if I pay my rent with a credit card?
Paying your rent with a credit card can get you out of a deadlock in the short term, but as we saw above, it can get expensive.
- If you can’t pay the balance every month, you will start to accumulate high interest charges. Credit card debt can cost you hundreds of additional fees over the years and take a long time to pay off, especially if you only pay the minimum.
- Landlords almost always pass credit card transaction fees on to their tenants. Even those who swallowed transaction fees during the pandemic will likely reimburse them once the threat subsides. Transaction fees range from 2.5% to 2.9%. For example, if your rent is $ 1,000 per month and you are charged a 2.5% transaction fee, that is $ 25 more per month.
- If you want to use a credit card to pay rent in order to accumulate credit card reward points, the transaction fees will almost always equal or exceed your rewards.
Of course, if you are facing an eviction or are considering more drastic measures like a payday loan, paying by credit card might be your best option.
If you absolutely have to pay with a credit card, some of the best credit cards offer an interest-free introductory period (some offer zero interest for up to 18 months). This can save you hundreds of additional interest charges, as long as you are able to pay off the balance before the interest-free period ends.
Better alternatives to paying rent by credit card
Millions of Americans are struggling to pay their rent right now. However, paying by credit card can put you in debt and cost you a pretty penny in interest charges. If you haven’t already, consider the following instead:
- Examine rent aid. If you are currently out of work, working reduced hours, or have lower family income, you may be eligible.
- If your situation is due to the coronavirus, contact one of the many organizations working to help Americans stay at home during the pandemic.
- Be honest about your situation and ask your landlord if they will accept partial payment. For many homeowners, this is preferable to an eviction.
- If you find bi-weekly payments more manageable, ask your landlord to allow you to split your monthly payment in half.
- Call your utility company, cell phone provider, credit card company, and car lender to find out if they offer help for people in financial difficulty.
- Find a roommate or rent a room. If you plan to rent a room (instead of adding a roommate to your lease), be sure to check local government requirements before you get started.
- If you have a special skill (like sewing, finishing floors, or tiling backsplashes), find out if your landlord will allow you to make improvements to empty homes in exchange for a reduced rent.
- Take a lateral restlessness from home or try to sell things you no longer need.
There are plenty of ways to make ends meet that won’t put you in high interest debt. Paying the rent with your credit card and accumulating debt should be a last resort.