For people staying on rent, paying it is unquestionably one of their largest monthly expenses as per their monthly budget. It is important to pay your rent on time to avoid any penalties. To manage the cash flow, you might consider using your credit card for online rent payment. But, did you know that aside from the many advantages of paying rent on a credit card, it may also have a negative impact by affecting your credit utilisation ratio.
See also: What are the benefits of paying rent through credit cards?
Factors to consider before using a credit card to pay for rent
If you aren’t able to pay your credit card bills on time, the cost of paying your rent with a credit card will significantly increase. Evaluate the following pointers before proceeding with using a credit card to pay for rent.
Fees
Processing fees are frequently associated with credit card rent payments. For instance, if your rent payment is Rs 35,000 and your processing fee is 2.99%, your monthly outlay will increase to Rs 1,046.50.
Interest charges
Your outstanding balance will accrue interest if you don’t pay your credit card bill in whole and on time. The amount that you must pay will increase due to the high-interest rate and processing fee.
Impact on your credit rating
Rent payments made using a credit card may result in an increase in your credit utilisation ratio, which in turn, lowers your credit score. You should maintain your credit utilisation ratio low, generally less than 30%, as it is important for determining your credit score.
It should be remembered that using a credit card to pay your rent can result in excessive interest fees. If the fees aren’t paid on time, the interest is too high at 35 to 40%. Therefore, only utilise it if you are confident in your ability to make timely payments. If your financial situation does not improve immediately, this should only be your very last resort because paying off credit card debt will become difficult.
FAQ
Can a credit card be utilised to pay rent?
Currently, SBI, Axis, Yes, Kotak Mahindra, ICICI, IndusInd and HDFC credit cardholders have the option of paying their rent using their credit cards.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
