Don't Pay Your Rent With A Credit Card. Here's Why

Paying your rent with a card might be tempting for several reasons. Perhaps you have a small "mom and pop" landlord who still requires the hassle of writing and mailing a paper check each month. Or maybe your funds are running low and rent is due before your next payday. Or perhaps the best reason of all: you're seeking to earn cash back, airline miles, or other points on what's considered a large expense for many folks. 

While there are many mechanisms available to pay rent with a credit card, it should generally be avoided because of the processing fees. Even if your landlord accepts credit cards directly, their financial institution is likely to charge them a fee of approximately 1.5% to 3.5% for accepting the card, and your landlord is probably not willing to just absorb that fee, effectively accepting 3% less money. Instead, they'll pass the fee on to tenants.

If your landlord isn't able to accept credit cards directly, several companies exist that will charge your card, then generate a paper check and mail it to your landlord using information that you provide, either on a one-time or recurring basis. A few popular players in that space include Plastiq, PlacePay, and RentTrack, all three of which have fees ranging from 2.90% to 2.99%. According to rent.com, the median national rent is $2,052 per month, so a 2.9% fee is going to equal almost $60 in extra cost each month for the privilege of using a credit card. 

Although many credit cards reward purchases with lucrative cash-back awards, airline miles, store credits, or hotel points, the value of those rewards is very rarely generous enough to offset the extra fees for using the card to pay rent. There are a few exceptions. One scenario is if a travel rewards card offers a large initial bonus for opening the account and spending a certain amount of money in a short timeframe.

For instance, the Chase Sapphire Preferred card offers 60,000 points after spending $4,000 on the card within three months of account activation. Those 60,000 points are worth a minimum of $750 toward travel, but $4,000 might be a formidable amount for many folks to spend on everyday purchases. It could make sense to pay one or two months' rent with the card if you might otherwise have trouble reaching the spending threshold to earn the bonus.

Similarly, owners of an airline co-branded credit card might find their points balance just short of the amount required for an award. For example, you need 70,000 points for a round-trip ticket to your dream destination, but you only have 68,000 points in your frequent flyer account. Many airlines also have frequent flyer miles available for purchase to make up the shortfall, but unless you're buying them during a sale, it might actually be cheaper to ante up the processing fee for paying rent. 

If you do have an exceptional reason to pay rent with your credit card, make 100% certain that you set the funds aside to pay the credit card bill in full when it comes due and before interest charges begin accruing. The average credit card interest rate is an eye-watering 21.19%, which will completely evaporate any arbitrage benefit that you may have gotten from paying rent with the card. 

Finally, there's Bilt Mastercard, a credit card whose issuer claims was designed specifically for renters. Indeed, you can pay rent using the card with no additional fees whatsoever and better still, earn valuable reward points for doing so — all with no annual fee. Bilt will cut a check to your landlord on your behalf and reward you with one point for each dollar spent on rent, up to 100,000 points per year. The points can be redeemed for travel through Bilt's own travel portal or transferred at a 1:1 ratio to partner airlines and hotels including, but not limited to, American Airlines, United Airlines, and World of Hyatt.

There are a few catches. First, you need excellent credit to be approved and second, you need to make at least five additional purchases with the card each month besides rent in order for the rent payment to earn reward points. Finally, there is no initial sign-up bonus to jump-start your points piggy bank.