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A survey has stated that almost the majority of the population pays rent via either internet banking or cheques. But if credit cards are used, the rewards and the benefits one can get are not comparable to the cost that is paid for using them.
Let us have a look at the advantages and disadvantages of using credit cards for the transaction of paying rent:
Rent is an expense that is unavoidable and hence the payment and the method used for payment is an important consideration for an individual. As this is an expense that cannot be avoided at any cost therefore a close look is necessary.
Advantages of Paying Rent Using Credit Cards
Reward Points
One of the major advantages of using credit cards in any transaction is the reward points one can get after using the credit card. In this case, the advantages that the reward points give are sometimes a good option even after paying the hefty interest on credit cards. Therefore one can use credit cards in more transactions so as to get the maximum benefit of these reward points and make the use of these cards more economical.
Credit Score
The credit score for any individual is dependent upon the credit utilized by the individual. The individual's repayment history and credit utilization are the two most important factors to note here. Hence if any individual uses the card for a regular transaction like paying rent then the credit score improves for that individual.
Manage Cash during Credit Crunch
In case of any emergency where the cash in hand is low, then the credit cards can be used for any purchases or transactions in the meantime. Credit cards are a boon in case of any cash crunch for any individual.
Manage Payments Timely
If the auto debit option is used for credit cards then the payments are auto-debited from the bank account. In this case, there are very low chances that the payments will be missed. In this way, the credit score can also be built.
Disadvantages of Paying Rent Using Credit Cards
Credit Utilization Ratio
Using a credit card in excess may sometimes affect your credit utilization ratio. If the credit card utilization goes above 30% then the credit score may get affected. Thus, credit card payments should be scheduled as per these guidelines.
Interest Costs and Other Costs
The most prominent charge that cannot be ignored while using a credit card is the interest charge. Apart from this charge, there are certain charges like processing fees and administration costs that are imposed by credit card lenders or third-party lenders.
Paying Bills
In the case of credit cards, if the bills are not paid on time, there is a penalty that is imposed for this non-payment. This penalty can attract a hefty amount to be paid by the individual resulting in extra payment apart from what is necessary.
Also Read: Credit Card Bill Payment
Increasing Debt
In some cases, the individual may not have the capacity to pay any accumulated debts. In this case, if there is any delay from the payer's side for the payment of the amount, then the financial budget may get disturbed and lead to extra debt.
Benefits which are not benefits
In some cases, the reward points and the cashback that are availed by the individual may not be of any use to him/her. In this case, if the reward points are going to waste, then using a credit card does not provide any benefit to the users.
Conclusion
In all, if we see that the credit card is being used for paying rent, then the advantages and the disadvantages are both prominent. Therefore the individual must be really careful when choosing to pay money for a transaction such as rent via a credit card. The benefits are overwhelming if they are used by the individual. But, on the other hand, if the individual is not comfortable and is not using any of these benefits, then the card might go waste.
The most important factor that can be considered for choosing whether to use a credit card or not is the interest and the other costs associated with it. If you think that you can manage some extra costs and in case of any emergency there will be no debt, then the card can be used for paying rent.
Also, one should consider that all the payments are made timely and there is no single payment that has been missed. Else, the costs associated will be penalties and they amount to quite a hefty sum.
FAQS of Does it make sense to pay rent through a credit card?
1:Which is the best app to pay rent via credit card?
One of the best platforms to pay rent via credit card is MagicBricks. The process in this app is quite hassle-free and the costs associated are also negligible.
2:Can I pay rent through my SBI credit card?
Currently, credit cardholders from SBI, Axis, Yes, Kotak Mahindra, ICICI, IndusInd and HDFC have the privilege to pay the rent via the credit cards of these banks. The process for these is quite simple: the rent agreement has to be uploaded and the details have to be entered by the payer.
3:Is it a good idea to pay rent via a credit card?
The answer to this question is not very simple and a lot of factors are to be considered while taking this decision. One of the most important factors is the cost of using a credit card. The credit card may increase the cost of paying rent by around 5% at least. If the cardholder is ready to pay this amount, then paying rent via a credit card is also beneficial.
4:Benefits of paying rent via a credit card?
The main benefit is that one can schedule a payment and hence no payments are missed and in the case of minimum cash the credit card can be used to pay rent.