Charging the rent to your credit card sounds insane -- it seems like it would be the eighth deadly sin, tied with going to a payday lender to get gambling money.
But as the New York Times points out, the strategy can be great if you're in good financial shape: If you pay off the balance each month you pay no interest, and you can rack up rewards on your credit card -- possibly round-trip airfare anywhere in the country each year if you have high rent!
But there are some pitfalls: Because of the way FICO scores are calculated, drawing down a large percentage of your available credit, even if you pay it off each month, can hurt your score. So if paying your rent by credit would leave you with little additional credit available, it might be a bad idea -- something that you cost you thousands on your mortgage when you do buy your own home.
The Times also points out, somewhat obviously, that if you can't afford to pay off your rent in cash each month, you shouldn't put it on your card. But if you can't afford to pay your rent out of your monthly income, that's a whole other problem...
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Reader Comments (Page 1 of 3)
12-05-2007 @ 6:32AM
Rose said...
I had a similiar idea and called my mortgage company to see if I could pay for my mortgage with my credit card. I do my utilities this way and thought it a great idea for racking up points. I always pay off my credit card each month so I didn't think it should be a problem.
Chase said absolutely not. Why not - I cannot figure. Maybe I need to get a mortgage from a different company.
12-05-2007 @ 1:38PM
Ginger said...
You can ALWAYS dispute any charge on your credit card. If you win the dispute, it is removed from your credit card and the mortgage company (or whomever) won't get paid. That's why some items you just cannot charge.
12-05-2007 @ 12:43PM
DonatoM3 said...
They may also not take credit card payments because Visa/Mastercard charge Merchants a 1.8%-3% fee and Amex charges 2.75% -3.5%. So yeah your mortgage company would be losing on every transaction.
12-05-2007 @ 1:26PM
April said...
this is the most ridculous thing!!! because me and my husband did this and now we are trying to dig our way out of debt!!!! people, DO NOT DO THIS!!
12-05-2007 @ 2:00PM
Kyla said...
It's a legal issue; you cannot pay one installment debt with another. The idea is to prevent cons from moving debts from one card to another and never paying anybody. Rent is not considered an installment debt - it's a month to month obligation, but you didn't receive money you're paying back. That's why you can pay rent with a credit card if your landlord will take it, but not a mortgage. It's the same reason you can transfer the full amount of a credit card balance from one card to another, under special circumstances (moving from one card with a higher APR to one with a lower APR) but you cannot make your individual monthly payments on your Visa with your Mastercard.
12-05-2007 @ 7:22AM
Bill Corbett said...
I am sorry, but in my humble opinion, paying anything on a credit card is a dumb idea. The many potential pitfalls far outway any small, possible benefit.
Some of the biggest problems folks in this country are having right now are financial ones, and the use of credit cards, for any reason, is a huge contributing factor to those financial problems!
Is that the best advice you have for today?
12-05-2007 @ 9:47AM
happilymarried71 said...
My husband and I pay almost everything with a credit card. Now, paying for our home that way is something new to think about. We are not rich by any means. We have been putting almost everything on a credit card for about 20 years now. We pay off the balance every month and we don't pay to use the card either; they tried to charge us and we said, no, we'll take our business elsewhere. They removed the yearly fee and even stopped asking us to pay it each year. Anyway, my husband takes care of paying all of our bills and in over 20 years we've not paid any interest on credit cards. Our home is now paid for, but, the government still needs our money for taxes on it; our three vehicles still need gasoline each week, two of the vehicles are paid for. The system of using credit cards works for us. Oh, a big point in our system is: you have the money/cash to pay for what you are purchasing even though you are putting it on the credit card. So, if we can't afford to pay cash, we don't buy it. I don't work outside the home any longer due to medical issues, so we have huge medical bills that get paid for in full, my husband's income is less than $70,000.00 a year and we give about 20% plus to our church every year. I guess you just have to be smart about money and very self-disciplined. We get a refund check from the credit card company every January that more than pays for the Christmas gifts we've purchased.
12-05-2007 @ 12:19PM
iwillbecauseiam said...
I pay my credit card IN ADVANCE...in other words I'm charging on a credit balance. I never, ever
am late or pay fees.
12-05-2007 @ 7:49AM
kern said...
Test
12-05-2007 @ 7:54AM
jbee said...
I can see that working for really organized people. I would probably get busy and not pay my card off on the due date. I don't get in over my head. I always pay off my credit cards, but I do now and then miss the due date.
12-05-2007 @ 8:42AM
pathersome said...
I receive my credit card through my bank. I can transfer the money from checking to credit card with a couple clicks of the finger. I pay alot of things with my credit card, that I would not if I had to mail in my payment.
12-05-2007 @ 7:56AM
Bill said...
I've paid everything I can with a card, paying them off each month. Mortgage companies don't want to pay the fees associated with accepting a credit card payment. Everything else goes on a card, groceries to cable bill, and each quarter I get a debit card or check worth $100 to $150. I'd say it's worth it!
12-05-2007 @ 7:56AM
kern said...
Of course they do not want you to pay with a credit card. The credit card company takes a discount and they do not receive their full amount. Also, charges can always be disputed.
12-05-2007 @ 8:18AM
Gus said...
Credit card companies would love this, they receive a fee for every transaction. You must pay off your card every month to benifit by this. However the lender pays and in the long run those who cannot pay off their card each month will bear the cost of it. By the way the credit card companies are now under fire for charging high rates to their customers.
12-05-2007 @ 8:21AM
B.J. Miller said...
"I am sorry, but in my humble opinion, paying anything on a credit card is a dumb idea."
I'm sorry Bill Corbett, but I'm going to have to respectfully disagree with your statement above.
If you are disciplined enough to NOT use a charge card for items you are unable to afford, and yet use your credit card for purchases you CAN afford, then you are able to pay off your credit card each month and stay out of debt. I use my credit card for everything I buy, and pay off the balance each month and I never realized my credit score was over 800 until I purchased a house last year and a credit check was done.
A credit card allows me to travel without carrying large amounts of cash with me, and it also doubles the warranties on many products I purchase. I also get cash back bonuses when I purchase gasoline, thus making the price of fueling my vehicles less expensive. Why wouldn't I take advantage of such an incentive?
I suppose I could borrow an old cliche and state "Credit cards don't kill peoples' credit, people do!"
12-05-2007 @ 8:32AM
Jen said...
I think it's a great idea if you can, and if you're responsible. It goes without saying that credit cards are a horrible idea for anyone who's not responsible. I can't put rent on my credit cards (my apt complex requires check or money order) but if I could, I would. I get cash back, and my credit card company will also give me 50-100% more if I use the credit at one of their partners (which I occassionally do if it's something I want/need) I've only been doing this for a couple of years, and have easily made at least a grand back this way.
Also, this allows me to have one due date a month, instead of having to remember to pay electric/gas/cable/phone/etc it just gets automatically paid by the credit card company and I pay it all in one lump sum. Soooo much easier, and allows me to rack up more interest in my savings account (if you time it right - my credit card company also allows me to change my due date, so I changed it to right after interest is accrued). If you're going to spend the money anway, go for it. But, again, with any credit card purchase, if you can't afford it and don't need it, don't buy it.
The problem with this country's financial problems is human stupidity and the people taking advantage of it.
12-05-2007 @ 8:37AM
Lynn said...
You can dispute all you want, if it isn't a valid dispute you will get absolutely no where........... Obviously those saying it can be disputed haven't done it or know how hard it is to get a legit dispute taken off your card!,,,,,,,,,,,,, credit card companies are betting on the odds of you not remembering to pay off .... its all about collecting the interest on a card..... most who use a card all the time do not pay them off.. that is what they are counting on.
12-05-2007 @ 10:28AM
matt said...
I had some fradulent charges from overseas on my credit card. They removed all of them except for one. I had to write and call numerous times before they removed it. I wonder how many people just pay the fradulent charges because it's faster and easier than taking the time to fight with the credit card company (time is money).
12-05-2007 @ 8:38AM
Leonard said...
Sounds like a great idea to me. I would think it a great convenience to landlords if they could electronically charge the rent on the due date of each month. How a landlord could go about setting things up so the charge is made automatically is probably a major obstacle.
12-05-2007 @ 8:48AM
DAN said...
THE ABSOLUTE BEST THING YOU CAN DO WITH CREDIT CARDS IS TO PUT THEM INTO A SHREDDER AND DESTROY THEM