February 28, 2024

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Should you pay rent with a credit card? ‘It could rapidly spiral,’ expert warns

3 min read
Should you pay rent with a credit card? ‘It could rapidly spiral,’ expert warns

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Housing is typically one of the biggest expenses in someone’s budget, and it’s natural to wonder about the best way to pay that bill.

For renters, sometimes it’s possible to pay with a credit card. While you could earn rewards and build credit by doing so, experts say it’s typically not a smart move.

“This is a very large payment. It could rapidly spiral in terms of additional interest rate costs,” said Susan M. Wachter, a professor of real estate at The Wharton School of the University of Pennsylvania.

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Your landlord might not even agree to accept payment via a credit card, as they may be subject to paying processing fees.

They simply “may not want the hassle,” said Matt Schulz, senior credit analyst at LendingTree.

Here are three things to consider before you charge your rent payment to a credit card.

1. Processing fees chip away the rewards

2. You run the risk of accumulating interest

3. Your credit score may dip

Using credit cards for large transactions can affect your credit utilization rate, the ratio of debt to total credit, which weighs heavily into your credit score, Lambarena explained.

“Putting rent on your card’s credit limit could hurt your credit score,” she said. “It’s usually recommended by experts not to use more than 30% of your amount of available credit.”

If you want to put the rent payment on your card, a good buffer is to make sure you have enough available balance. You can ask for a credit limit increase from your card issuer to minimize the effect to your score.

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