Credit Card: Why you should not pay rent through your credit card?
Many card holders use their credit cards to pay their rent. However, there are a few drawbacks. If you fail to pay the credit card bill in full it may accumulate more interest over time.
Cashless transactions are gaining popularity with more people resorting to online payments and credit/debit cards for their daily expenses these days. Credit cards become convenient for online payments, specifically when there is a cash crunch. Many card holders are also using credit cards to pay their rent as it seems to be a convenient option. Paying rent using credit cards becomes easier when you are running short of cash when the deadline to pay the rent is approaching.
However, it might not be the best idea to pay rent with credit cards as such payments often come with a lot of drawbacks and can eventually impact the cardholder's financial health.
Here are a few things that you know before using your credit card for rent payments.
Drawbacks of paying rent through credit card
Higher charges: As credit cards usually come with certain interest rates, paying rent adds up more quickly to it. As a result, if one fails to pay the balance in full each month, the total amount could end up accumulating a lot of interest over time.
Debt: Similarly, paying rent with credit cards also increases the chance of accumulating debt. If you fail to pay the balance in full, the debt will rise over time.
Fees and usage limit: When you make payments with credit cards, it can invite certain additional fees. Many credit cards also impose certain restrictions on rent payment like the maximum amount you can use for the purpose.
Credit score: Credit card payments directly impact a person's credit score. If someone pays large amounts for rent and is unable to pay off the balance on time, it can negatively impact the credit score. This makes it difficult to obtain future loans. Also, using credit cards for almost every expense also impacts the credit score.
Paying rent through credit cards should be the last option if you are in a financial emergency or facing a cash crunch. Though you get an interest free period to repay the credit card bill but eventually you may end up in a debt trap. You should opt to use credit cards to pay rent only when you are committed to clear the full credit bill amount within the due date.