Have you ever been tempted to pull out your credit card to pay your landlord? Putting your rent on your credit card might seem like a good idea if:
- You think it’s a good way to help you quickly accumulate credit card points that can be used toward travel, cash back or other rewards.
- You are a little short this month and paying by credit card seems like your only option.
As good as the idea may appear, paying rent via credit card can be tricky.
Reasons for the landlord to refuse
There can be legal consequences for a landlord who accepts a payment from anyone other than the tenant named on the lease. Although your name may be on the credit card, it is actually the credit issuer who would be making the payment, and accepting a payment from a third-party not named on the lease can create a new legal tenancy. Few, if any, landlords want to take this risk.
In addition, when you use a credit card there is an official dispute period during which a tenant can say the payment was made in error — creating problems for the landlord. Plus, like a retailer, a landlord who accepts plastic is subject to paying the fees associated with credit cards. Unless those fees are tacked onto your rent payment, the landlord is essentially accepting less than the agreed-upon rent.
Third-party services offer a workaround
For a fee of up to 3 percent of your rent payment, services like Plastiq and RentShare allow you to use your credit card to pay them, and they pay your landlord on your behalf. Contact your landlord or management company before attempting to pay through a third-party pay service to confirm that the payment will be accepted. Many landlords will only accept a paper check directly from you as payment of rent.
Good reasons not to pay rent by credit card
Even if you find a way to pay your rent each month via credit card and rack up points in the process, doing so may not be in your best interest. These three situations might give you pause:
- Credit card points are negated by fees: It makes sense to use a credit card to pay rent only if the credit card rewards earned are greater than the fees paid to a third-party pay service. For example, many credit cards offer 2 miles per dollar spent, with each mile worth one cent. This scenario essentially means you are earning 2 percent on each purchase. If a third-party pay company charges a convenience fee greater than 2 percent for its services, you are losing money.
- You utilize too much available credit: How much you owe as a percentage of your available credit — also called credit utilization — accounts for 30 percent of your total credit score. In general, the less you owe at any given time on revolving credit, the better. Say you use a credit card with a $3,000 limit. Owing less than $900 on that card is viewed more favorably than owing $2,500.
- You are unable to pay the credit card off in full each month: When you make a practice out of paying rent with a credit card, you run the risk of racking up debt rather than credit card points. Not only that, but the interest charged on a revolving credit balance can be high. Make sure you can pay off that credit card each month.