Monthly rent payments are typically the largest expense a renter will incur, which means finding a convenient and flexible way to pay is a top priority for most renters. While some may pay this expense with cash, cheque, or an electronic fund transfer, many have been wanting a more convenient and beneficial way to pay their rent. In particular, Canadian renters are often curious if they can use their credit card to pay rent.

Can You Pay Rent with a Credit Card?

Generally, landlords don’t accept credit cards as payment as there are numerous costs and risks associated with this payment method. When landlords accept this form of payment they have to watch out for card processing fees, payment processing time, and the potential of a credit card chargeback. With so many financial liabilities, most landlords only accept cash, cheque, or a direct fund transfer as a method of payment.

That said, advances in the fintech industry have created an indirect way for you to use your credit card to pay rent. Third-party services like Plastiq, RentMoola, and Get Digs allow Canadian renters to use their credit cards to pay rent whenever they want.

How do You Pay Rent with a Credit Card?

In order to use these services, you’ll first need to create an account by registering your email with them. Once you’re logged in, you’ll have the opportunity to create an order. You can choose to make a one-time payment to your landlord or set up a recurring payment. Here you’ll also provide information regarding your landlord and payment details. Once you’ve made your payment, the service provider will then send the funds to your landlord via e-transfer, direct deposit or a cheque.

It’s important to note that while your payment transaction with these services is instant, it can take a few days for them to process the order and send the money to your landlord.

Cost of Paying Rent with a Credit Card

If you choose to use these third-party services, it is imperative that you consider the fees involved. In order to process the transaction and cover the payment network fees, your provider will charge you on average between 1% – 3%. For example, if you were to use RentMoola you’ll incur a service fee of 2.50% if you use your Visa, Mastercard, or prepaid debit card. This means a rent of $1,500 will incur a service charge of $37.5 or $62.5 for a rent of $2,500. That’s $450 – $750 in a year!

Similarly, if your landlord does accept credit card payments, be sure to ask whether the transaction fee will be passed on to you. These typically range between 1% – 3% as well. Meaning you can end up paying between $15 to $45 on a $1,500 rent. A hefty fee for something you can pay without incurring any fee if you were to pay by cash, cheque, or an electronic fund transfer.

Advantages and Disadvantages of Paying Rent with a Credit Card

Whether you pay by cheque, cash, e-Transfer, or credit card, there will always be certain advantages and disadvantages. Depending on your situation, using a credit card to pay rent can be worth it.

Advantages

Build Your Credit Score

Your payment history accounts for 35% of your credit score. By paying with your credit card, your rent payments will contribute to your overall credit score every time you pay down your credit card bill.

Earn Points

One of the major advantages of paying rent with a credit card is the points or cash back rewards you can earn. It can be particularly helpful when you need to reach a certain spend limit in order to receive the credit card’s welcome bonus. However, it’s important to calculate whether the points earned outweigh the fees charged with these services. For example, if you’re being charged $30 every time you use the service, you need to make sure that the points you receive are worth more than that.

Defer Your Rent Payment

If you need to defer your rent payment for a week or two due to a financial emergency, then paying rent with your credit card can prove beneficial. In general, you can defer the payment for about 30 days before it’ll start to incur interest. This can give you the time you need to deal with the emergency without having to rely on other high-interest products like a payday loan.

Disadvantages

Fees

One of the main disadvantages of paying rent with your credit card is the fees charged per transaction. Fees typically range between 1% and 3% which can add an extra $15 to $45 on a $1,500 rent payment. Moreover, if you’re unable to pay your credit card bill in time, it will incur interest charges which typically range between 18% – 21.99%.

Hurt Your Credit Score

When you add your rent payments to your credit card, you’ll be increasing your credit utilization ratio which accounts for 30% of your credit score. In general, it is recommended that you keep your credit utilization ratio under 30% as higher amounts will negatively impact your credit. Moreover, the larger your credit card balance the harder it will be to pay the minimum balance. This will not only negatively affect your credit, but you’ll be slapped with interest and late payment charges.

Should You Use Your Credit Card to Pay Rent?

In general, using your credit card to pay rent isn’t the best choice due to its high fees and its potential impact on your credit. However, in an emergency situation, your credit card can help cover expenses for a short period of time. It can also be beneficial when you’re trying to earn a welcome bonus on your credit card. If you choose to pay rent with your credit card, make sure your math is on point and have the funds available to pay off your balance.