Why Should You Not Pay Rent Using A Credit Card?

For people who pay credit card dues every month may find rent payment using credit card as another convenience. But if you have paid your rent using your credit card and in the end, you do not have sufficient funds to clear your credit card dues on time, then it would lead to heavy interest charges and would adversely affect your credit score.

If you are out of options and your last resort is a credit card, you would need to understand that paying off rent through credit cards can help to avoid the short-term financial crunch. Such relief would last for a month or so because at the end you will be required to pay credit card dues. It is to be noted that the interest on credit card dues, even if opting for EMI facility is substantial.

Suggested read: Major Credit Card Mistakes to Avoid

Using a credit card can lead you to pay more interest (approximately 30-40%) per annum, still, it is useful in some situations when you don’t have quick money in hand and lack liquidity. Below are some of the advantages and disadvantages of paying your rent using a credit card:

The cost of paying your rent via credit card will increase substantially if you are unable to pay the credit dues on time. Ideally, you should avoid paying rent using your card. But in case if this is the last resort left at your side, you should consider the following factors before opting for the same:

Fees: Rent payments via credit card often come with processing fees. For instance, if you have a rent payment of Rs. 35,000, and you are paying 2.99% processing fee, that’s an additional Rs. 1046.50 every month.

Interest Payments: If you don’t pay your credit card bill in full and on time, the interest payment on your outstanding balance can pile up. The hefty interest plus the processing fee would undoubtedly escalate the amount that you are required to pay.

Effect on your Credit Score: Paying the rent with a credit card could lead to an increase in your Credit Utilization Ratio (CUR), which on the other hand negatively affects your credit score. The credit utilization ratio is a key factor that affects your credit score. Therefore, you should try to keep your CUR as low as possible.

Read more about Lowering your Credit Utilization Ratio

It is clear that choosing a credit card for paying your rent will incur high-interest charges. The interest here is too steep at around 35%-40% if the dues are not paid timely. This is an expensive option and of the worst debts to have. It is not at all advisable to go for a revolving credit option. You should use it only if you are sure about your timely repayment capacity. This option is to be used as the last resort because paying off credit card bills will become hectic if your financial crunch does not end soon.