Your mortgage or rent is likely to be one of the biggest recurring expenses. As of now, there is only one publicly available no-fee option that you can pay your rent with i.e., a credit card.
Due to the interchange fees of banks, accepting credit cards without paying an additional fee would imply that most banks and landlords would lose 2% to 3% of the mortgage payment or rent for each month.
Rental payments with credit cards are not considered a boss move for everybody, however, it may vary depending on the situation. The customers often remain in an state of perplexity whether to to use it or not even if they are offered a reward against some factors. They may often walk away with the fear of losing money!
But there might be a time when you don’t have any other choice left except to borrow the rental payment from your credit card. If you are looking for ways to pay rent and how can you pay rent through credit cards, keep reading the article to know what consequences and benefits come with it.
Is it possible to pay rent with a credit card?
Yes, it is possible to pay rent with a credit card, however, it depends on your landlord whether he will accept the payments via credit card as a mode of payment. If they do not, then another option of using third-party apps is available which allows you to pay rent with your credit card but for this, you may need to pay extra fees. Many rental housing agencies also allow tenants to pay their rent using their Mastercard or Visa credit cards with a convenience fee of 2.24%.
Whenever you make a transaction using your credit card, the company charges a processing fee. This is because they want to secure their profit over the money you are using to pay your bills as a convenience fee. The convenience fee greatly depends on the payments you want to transact from your credit card. For instance, you pay $1000 as your monthly rental payments to your landlord, a convenience fee of 2.5% ($25) will be charged which will be added to your total amount. Over the year, the amount with the same transaction will reach up to $300, which means it’s 33% of your monthly rent.
But what if your landlord denies receiving payments from a credit card? You can use third-party apps like Plastiq, RadPad, or RentTrack. These third-party payment services will keep tracking your rental payments and will help you maintain a good credit history. But of course, they will also charge a fee to transfer your credit card payments into the mode of payment that your landlord agrees to receive.
Work with your landlord to figure out a favorable mode of payment(s). Even if you are not willing to pay your rental payments through cash, you can use checks, Venmo, Square, PayPal, automatic ACH, money orders, and other payment methods.
How to pay rent with a credit card
On using a third-party application to pay your rent with a credit card, you must first understand the TOS of these applications. These applications also require information about the landlord in order to make a credit card payment.
Plastiq charges 1% on every transaction you make using your debit card, but with a credit card it may charge up to 2.85% on every transaction. It allows you to send the payment without having a receiver’s account in the application. You can easily schedule monthly payments which your landlord will receive electronically.
RentTrack is an unusual payment gateway and another option for paying rent via credit card. It does not require approval from your landlord to make payments through the website. Once you want to send rent payments, the service will transform them into a paper check and send it to the landlord. For ACH payments, the service charges $6.95 per transaction and for credit cards, 2.95% of the total amount will be charged.
The service is registered with major credit bureaus i.e. Equifax, Experian, and TransUnion. Before sending your payments you must ask your landlord if they accept paper checks or they will report your payment method to these bureaus. Credit bureaus usually calculate the credit scores that impact your ability to get a loan, buying any property, or any insurance policy.
Even though many online payment methods offer easy rental payments services and they charge fees for that, some of them allow the landlord to waive this fee entirely. Here’s a list of some other popular third-party services that help you in paying your rent through credit cards.
$17 to $ 37
The app charges a flat rate instead of a percentage.
2.9% – 3 %
Requires the merchant to have his account in the app
|The property manager would decide the charges every time|
Many online payment gateways allow you to have your landlord’s cooperation to work out for these payment methods as they need the accounts of both landlord and the tenant on the same website. Few will take the transaction fees as a convenience fee and send the paper check to your landlord.
Every time you may have to face a few implications while making your transactions using credit cards. To understand them, read the next section of the article.
Pros and cons of paying your rent through credit card
- People often get confused while writing checks manually. Using your credit card to pay rent is an extremely feasible option for those.
- If you pay your credit card debts on time and maintain a good credit history, it will be helpful for your future endeavors.
- The possibility of earning rewards for using a credit card for your monthly payments is also there. You can expect to have a convenience fee waiver or a refund of the fee through the company after a specific time and amount spent.
- Many times merchants charge a high processing fee. A monthly 2.5% of extra charge per transaction becomes a substantial amount at the end of a year and proved to be a financial burden. In case of non-payments, it can eliminate any reward that you may receive in the future.
- The optimal credit utilization ratio should remain below 30%. The credit utilization ratio greatly impacts the credit score that proves you credible to have any facility in the future. Reaching above 30% will eventually affect your credit score.
- If you were found irresponsible in your credit card payments, then it can create problems for your future transactions. You may be restricted to make more transactions and in the end, it will impact your credit score.
If your credit score is affected badly or your landlord has reported you to credit bureaus, then it is high time when you should look for a place that lies under your budget to get moved on.
Unfortunately, with ever-increasing rental charges, it has become difficult for people to look for residential spaces that come under their financial budget. For this, one must know how much money should be paid for rent.
Determine how much to pay for rent?
Adhering to the following instructions, you might have an idea of how much to pay for rental purposes out of your budget and to find a place where you can live comfortably even if you have to compromise your living standards.
Step # 1: Search for an affordable apartment online
Rental charges greatly vary depending on the number of factors such as amenities, neighborhood, and most of all season. Explore options online and search particularly in the area where you hope to move. Make your notes and list down to compare area prices and amenities that fluctuate in changing seasons.
Step # 2: Consider your finances
Before determining how much to pay for rent, you should be aware of your monthly cash flow. Create your budget spreadsheet and find out the cash flow by mentioning the cash coming in and going out. Make sure to list down every expense even if you are planning to have dental insurance, list that too.
Your budget list may extend if you are moving from your parental house, estimate your monthly expenses including gas, internet, electricity, and other bills.
Step # 3: Step in to meet 40x requirement
When you select the place, on top of your costs there’s signing a lease payment. Many times, landlords ask for proof that your annual income is equal to at least 40 times of monthly rent. For instance, if the room/apartment you select has the rent of $2000 a month, to meet the requirements your annual salary must be equal to $80,000 to get it approved.
If the place falls into your monthly budget and you find everything on the place, then you can also list your friend’s or family’s name as a guarantor who meets the needs of 40 x of the rent.
Step # 4: Try the 50/30/20 rule to work out rent in your budget
Use the 50/30/20 budget rule to figure out how much rent you can afford to pay. This method will help you in identifying the right percentage to allocate your monthly pay (after paying taxes) such as 50% for your needs, 30% for wants, and 20% for debt payments or savings.
For example, if you earn $3,000 monthly after taxes, you would divide your paycheck like:
- $1500 for needs which also include rent, groceries, utilities, and insurance.
- $900 on wants including happy hours, shopping, and concerts.
- $600 on paying additional debts and savings.
Step # 5: Stay flexible
Even though there are no perfect parameters to tell you how much to pay for rent, following some guidelines will surely help you tweak your budget and tell you how you should manage your finances when things get hard to control.
Compromising amenities and services may help you in living more comfortably at the end of the day. So stay motivated and flexible unless you get a system that suits you best.
So, can you pay rent with your credit card? The answer is yes! Is it a good idea? Well, that depends on the situation! Unless you are lucky enough to avail fee-free payments of the creditor by using a third-party payment provider that completely makes sense for giving an extra fee. You can go for either Plastiq or RentTrack as both are offering the best services to the customers. This is totally your decision! Good Luck with the choice.
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