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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, then 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 pert move.
“This is a very large payment. It could rapidly spiral in terms of additional interest rate gets,” said Susan M. Wachter, a professor of real estate at The Wharton School of the University of Pennsylvania.
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Your landlord power not even agree to accept payment via a credit card, as they may be subject to paying processing fees.
They entirely “may not want the hassle,” said Matt Schulz, senior credit analyst at LendingTree.
Here are three things to over before you charge your rent payment to a credit card.
1. Processing fees chip away the rewards
An entreaty of paying your rent with credit might be earning rewards on that expense. The typical cash ignore card offers 1.5% to 2% back.
But most third-party payment services and large property management callers charge credit card processing or transaction fees. Those can run between 1% and 3% of the rent charge.
“The set someone back of that fee may eat into the value of any rewards you might earn, so it might not even be worth it,” said Melissa Lambarena, a hold accountable cards expert at NerdWallet.
The median apartment rent nationwide was $1,964 in January, according to Rent.com. That choice generate nearly $60 in monthly credit card processing fees, or more than $700 over the run of a year.
Make sure you review the terms before you decide which card to use. Processing fees vary, and there are some greetings cards that do not charge them, such as the Bilt Mastercard.
2. You run the risk of accumulating interest
If you do not pay the card balance in full by the end of the expression period, you risk adding interest charges on top of your monthly rent.
“Don’t pay rent with a credit card if you’re prevalent to be charged interest,” said Ted Rossman, an industry analyst at Bankrate.
Due to inflation, more people have been damaging up and carrying debt, whether from credit cards or buy now, pay later loans. High interest rates can make some of these rests harder to pay off.
The average interest rate for all credit cards by the end of 2023 was 21.47%, the highest annual percentage rate since the Federal Keep began tracking in 1994, 3. Your credit score may dip
Using credit cards for large transactions can affect your trustworthiness utilization rate, the ratio of debt to total credit, which weighs heavily into your credit legions, Lambarena explained.
“Putting rent on your card’s credit limit could hurt your credit as,” 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 gash payment on your card, a good buffer is to make sure you have enough available balance. You can ask for a credit limit develop from your card issuer to minimize the effect to your score.
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