Paying rent with a credit card? Here's what you must know
We have seen that many of us usually transfer the money using digital payments like UPI, Debit card, Google Pay, etc. But using a credit card during the cash crunch is not a bad idea to pay rent.
Due to COVID -19 pandemic, many people are going through a lack of liquidity due to job loss, salary cut, or business loss. In this case, they are finding some other source to pay their rent and other expenses on time. Those staying in a rented house are much more worried because they are far away from their hometown, and in this pandemic situation they have to bear all the losses alone. By keeping in mind this entire situation many real estate companies and builders have started the rent payment facility with the help of their credit card.
Although, using a credit card can lead you to pay more interest which is around 30%-40% per annum, still it is useful for some when you don’t have money in hand and lack liquidity.
Recently, Housing.com a real estate company portal launched a rental ‘Pay Rent’ platform with the help of which one can transfer the rent via credit card to the owner’s bank account directly. One can pay the rent only with the help of the mobile app of Housing.com.
Many players like NoBroker.com and Rent pay (London based RedGiraffe’s Fintech platform) also allows paying rent through credit card on selected banks.
We have seen that many of us usually transfer the money using digital payments like UPI, Debit card, Google Pay, etc… But using a credit card during the cash crunch is not a bad idea to pay rent.
Still one should know the pros and cons of using a credit card while paying the rent.
Pros of paying rent with a credit card
- You can save some cash if you are going through financial crunch and loss
- Helps in accumulating reward points while using a credit card and can redeem further
- One can use the reward points depending on the cards for travel, gift cards or even redeem as cash further
- It will help you to improve your credit history and score after paying the amount timely
- Gives flexibility while paying rent and increases your liquidity to pay rent on time during cash crunch
- One can able to automate the monthly payments with the help of credit card. This reduces the tension of missing the due rent
- Can pay 2-4 months’ rent at once by using the credit card according to their credit limit
- Also, paying rent with the help of credit card can help you to meet the required spending amount to earn sign-up bonus accordingly
Cons of paying rent with a credit card:
- Paying rent with a credit card and increase the extra charge which credit card company will charge service charge form you which can be from 2-4 per cent
- Interest rates charges are high on credit card. Some may get relief for the first year on credit card usage. But from another year it may increase to a high rate of interest
- Usage of credit card continuously for every expense and rent can lead to bad and negative credit score. Try to avoid utilizing your credit card for all expenses regularly
- One can also miss the payment if the credit limit exceeds or the card gets expired
- Should we use the credit card to pay rent?
- One can first discuss with their landlord and then pay the rent. If your landlord agrees you to give a grace period till 2 months then avoid paying rent with credit card
- Keep some emergency funds for future. So, that one can utilize that money for better use
- If one is really in cash crunch and problem. Then paying rent with credit card during this situation is a good option
- Try to avoid credit card as much as you can
- Pay the amount of EMI, credit card bill on time to avoid huge rate of interest per annum
- So, unless and until you are not facing any cash crunch then pay through your debit card or give cash to your landlord. Else, if you are genuinely in facing financial problem then look into all the consequences of credit card and then pay the rent with credit card
- One must know all the criteria of costs and benefits before paying the rent with credit card
- Don’t forget the moratorium period. Remember, interest would be charged from you only on whatever transactions you have made. So always keep the outstanding amount to face minimum loss.