Rent payment via credit card: Pros and cons of paying rent via credit card

Ever thought of using your credit card to pay rent? It sounds convenient, and it is. From reward points to flexible cash flow, many people are now turning to credit cards for paying rent. There are benefits, but also fees and risks to consider. Before you swipe your card for rent, here’s an overview of how it all works and what you need to keep in mind.

How do credit cards work?

A credit card lets you borrow money from the bank to make purchases. Each month, you are given a spending limit (called a credit limit), and you can use the card to pay for goods and services – including rent.

You get a bill at the end of your billing cycle, and if you repay it in full on time, you won’t be charged any interest. If you delay or pay only a part of it, high interest rates kick in.

Advantages of paying rent with a credit card

• Earn rewards and get cashback: Using a credit card for rent payments can help you accumulate reward points or cashback, especially if your card offers benefits on large transactions. For instance, if your card provides 2% cashback and your monthly rent is Rs 30,000, you could earn Rs 600 monthly, totaling Rs 7,200 annually.


• Improve credit score: Regularly paying rent through your credit card and settling the bill on time can positively impact your credit history.


• Manage cash flow: Credit cards offer an interest-free period, typically up to 50 days, allowing you to manage your cash flow more effectively. This can be particularly beneficial during months with tight finances.


• Record-keeping: Paying rent via credit card through digital platforms ensures timely payments and provides a clear transaction history. This can be useful for budgeting and for any future references.

You can explore multiple credit cards through Moneycontrol’s online platform. Moneycontrol has partnered with leading credit card issuers to offer access to multiple credit cards with attractive features. Most of these cards come with no joining and annual fee. You can pick cards for various needs like shopping, travel, dining out, OTT subscriptions and others. The 100% paperless application process ensures quick and easy approval.

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Disadvantages of paying rent with a credit card

• Processing fees: Most platforms charge a convenience fee for credit card transactions, typically ranging from 1% to 3% of the rent amount. For example, a 2.5% fee on a Rs 20,000 rent equates to Rs 500 monthly, or Rs 6,000 annually.


• High interest rates: If you don't pay your credit card bill in full, the remaining balance incurs interest. This can quickly negate any rewards earned and lead to significant debt.


• Impact on credit utilisation ratio: Using a significant portion of your credit limit for rent can increase your credit utilisation ratio. A high ratio can negatively affect your credit score.


• Can accumulate debt: Relying on credit cards for essential expenses like rent can lead to a cycle of debt, especially if not managed responsibly.

Tips while paying rent via credit card

• Assess the net benefit: Calculate the rewards earned against the processing fees to determine if it's financially beneficial.


• Timely payments: Always pay your credit card bill in full to avoid interest charges.


• Monitor credit utilisation: Keep your credit utilisation ratio below 30% to maintain a healthy credit score.


• Choose the right platform: Select a platform that aligns with your needs, considering factors like fees, ease of use, and required documentation.

Will my landlord accept credit card payments?

Most landlords in India don't have card machines. But rent payment apps like CRED or Paytm can help. You pay them using your credit card, and they deposit the rent into your landlord's bank account. So, it doesn't make a difference if you pay via credit card. Some platforms, however, may verify the bank account by depositing 1 Re. to the bank account.

To conclude, credit cards are handy, but not always the best option in a financial crunch. If you’re short on rent money this month, you might consider a small personal loan instead.

Moneycontrol, in partnership with top credit card companies, offers access to multiple credit cards through its app and website. You can apply for a credit card without the need to submit any physical documents. These credit cards come with many attractive features for shopping, travel, restaurant deals and discounts.