Credit Card Basics

Can I Pay My Rent With a Credit Card?

Whether it's because you're short on cash, or you want to haul in more credit card rewards, you may be tempted to charge your monthly rent to a credit card. You might be allowed to pay rent with a card, but whether it's a good idea to do so depends on your particular situation.

During the coronavirus pandemic, the number of renters paying rent with a credit card has climbed. Property technology company Zego found rent payments via credit card were up 43% in the first six months of 2020 compared with the same period in 2019. Data released in October 2020 by Entrata, a provider of property management software, shows 29% of renters had paid rent with a credit card during the pandemic.

Furthermore, Entrata says 52% of renter surveyed had paid rent with a credit card during the pandemic always use a credit card to pay rent; 33% indicated they could pay rent with cash, but their landlords were waiving credit card processing fees during the pandemic; and 12% of the credit card users said they had no other way to pay rent.

Here's what to know about paying your rent with a credit card, including the pros and cons.

Is It Possible to Pay Rent With a Credit Card?

Many landlords refuse to accept credit cards as a method of paying rent. But if you make monthly rent payments to a big property management company or use a third-party service, you might be able to do it.

Putting your rent payment on a credit card often results in an extra fee, however. For instance, the New York City Housing Authority lets tenants pay rent with a Visa or Mastercard credit card, but it imposes a convenience fee of 2.25%.

Why does paying rent by credit card result in fees being charged? Anytime a credit card transaction is made, the merchant must pay a processing fee. In many cases, merchants protect their profits by making you pay a little more.

A landlord normally requires you to pay a credit card processing fee on top of your rent and any other fees. The processing fee typically ranges from 2.5% to 2.9%. So, if you pay $1,400 a month for rent and the processing fee is 2.5%, an extra $35 will be tacked onto the payment. Over a year's time, those fees would add up to $420, which represents about 30% of a single month's rent payment.

If your landlord doesn't accept credit card payments, you might be able to pay with a credit card through an online service like Plastiq, RadPad or RentTrack. These services could help you build credit and avoid late payments, but they'll charge a fee to convert your credit card payment into a payment to the landlord. The fee is 2.85% for Plastiq, 2.99% for RadPad and 2.95% for RentTrack.

If you don't want to put your rent on a credit card, your landlord likely offers other payment methods. They include:

  • Check (personal, certified or cashier's)
  • Automated ACH payment from a bank account
  • Cash
  • Money order
  • Payment apps like Venmo, Zelle, Apple Pay, PayPal and Square

Why Would You Want to Pay Rent With a Credit Card?

Many people pay rent with a credit card because they want to earn travel, cash back or other credit card rewards. Cash back rewards range from 1% to 3%. So, if you pay $1,400 in rent, you could earn $14 to $42 in cash back if you put that monthly payment on your credit card. Depending on the fees your landlord charges, however, rewards may not be enough to justify paying with your card.

Paying rent with a credit card could also help you build credit as some services, including RentTrack, will report your on-time rent payments to the three major credit bureaus. On-time rent payments aren't typically reported to credit bureaus, and their presence could help you build a positive history and lift your credit scores.

Some renters might want to put rent on a credit card to take advantage of the card's sign-up bonus. Let's say you're approved for a card that gives you a $250 bonus if you spend $5,000 on the card within your first three months with the card. You could go a long way toward scoring that bonus if you put $1,400 a month in rent payments on that card over the three-month bonus period (a total of $4,200). Just be sure to pay down this balance immediately so it doesn't tank your credit utilization, which is a big factor in your credit scores.

Still other renters might be strapped for cash—as we've seen a lot during the pandemic—and must depend on a credit card to pay rent. This can preserve cash for other expenses, but it could turn into a bad habit if you let your credit card balance roll over from one month to the next. That's because interest will continue to be assessed as long as you maintain a balance. If you've already done everything you can to reduce expenses and increase your income, paying your rent with a credit card could be a good option to prevent missed payments and eviction.

Putting your rent on a credit card also might let you avoid taking out a payday loan. Taking into account the sky-high fees, the effective APR (annual percentage rate) on a short-term payday loan can exceed 1,000%. By comparison, the typical APR on a credit card was roughly 16.5% in August 2020.

Why Paying Rent on a Credit Card Might Be a Bad Idea

It might be appealing to collect rewards or preserve cash by paying rent with a credit card, but it might be a bad idea. Here are three reasons:

  1. A processing fee of around 2.5% to 2.9% might be added to your monthly rent payment when you pay with a credit card. This could add to your financial burden or wipe out any credit card rewards you receive.
  2. Your credit utilization ratio could go up, which then can harm your credit score. This ratio shows how much of your available credit you're using. The lower your ratio, the better, but it's smart to keep the overall utilization ratio and the ratio on each card below 30%. Going above that percentage could really start to hurt your credit scores. Your credit utilization ratio is an important factor in your scores, second only to your payment history with most scoring models.
  3. You might max out a credit card, which would prevent you from using it for other purchases, and—as stated above—have big credit score consequences.

What to Do if You're Having Trouble Paying Your Rent

If a credit card isn't an option for you, you have alternatives. You might explore one or more of the following:

  • Seek assistance with rent if you are out of work and struggling to make payments. Check with your landlord as well as with local government agencies, charities or nonprofit aid groups to see whether they can help. For more information, visit the Consumer Financial Protection Bureau website, or
  • Look into getting a roommate to cut your monthly rent.
  • Consider relocating to a cheaper apartment or a cheaper city if you can afford to move.
  • Find out whether your landlord offers bonuses for referring new tenants, and look for someone who wants to rent an apartment in your complex.
  • Barter with your landlord to do repairs or other labor in exchange for a rent reduction.
  • Borrow money from relatives or friends.
  • Move in with family or friends, at least temporarily.
  • Tweak your budget to ensure you've got enough money to cover rent each month, or create a budget if you don't already have one.

The Bottom Line

When you're weighing whether to pay rent with a credit card, keep the advantages and disadvantages in mind. You might, for instance, be able to reap credit card rewards for charging a rent payment, but you might be heaping on more credit card debt at the same time. Ask yourself this: Will putting a rent payment on a credit card make sense in the short term but be harmful in the long term? The answer to that question could help you decide whether to charge ahead with paying rent with a credit card.

Whatever your decision, be sure to keep your credit and financial health in mind. If conditions are in your favor and it's done responsibly, paying your rent with a credit card could help you build credit and even save you some money. It's possible, however, that it could stretch your finances thin and cause you to end up under a mountain of debt. Weigh your options carefully, and be sure to monitor your credit moving forward.