Rent payment is one of the biggest monthly expenses for most of us. This often requires various adjustments in the household budget. Sometimes due to lack of cash, there is a problem in paying the rent. In those situations, we start thinking of paying the rent using credit cards. But, such payments can spoil your financial health. You may ask how? What to do if there is no other option? Should credit cards not be used to pay rent? You will get answers to all these questions here.
First of all, for those who pay credit card bills regularly, it can be used as a convenience for rent payment. However, if you pay the fare using a credit card as a last resort, the situation becomes different. Then you don’t have enough funds to pay off your balance on time. If the balance is not paid on time, it can have a serious impact on your credit score. Apart from this, higher interest charges may also be imposed.
Then what if using credit card is a compulsion?
In that case, you need to understand that paying rent through credit card can help you avoid financial crisis in the short-term. You can use your card to avoid cash shortage in the short term. The reason is that eventually you will have to pay your credit card bill. Apart from this, you should note that the interest earned on the outstanding amount of credit card is quite high. Even if you choose EMI option. If you use a credit card to pay your rent, you may end up paying higher interest. This could be around 30-40% annually. Still it is useful when you do not have quick money.
What things should be kept in mind while paying rent through credit card?
1. Fees: Ideally you should avoid paying rent using credit cards. However, if you are still making payment using it, then you should know one thing. If you somehow fail to pay your credit card dues on time, the cost of paying the rent will increase significantly. Additionally, there is often a processing fee for rent payment using credit cards. This means you pay more for your fare for the convenience.
2. Credit Score: Do you know how important your CUR is? CUR or Credit Utilization Ratio is an important factor that affects credit score. There is a possibility that if you make your rent payment using a credit card, your credit utility ratio may also increase. This can adversely affect your credit score.
3. Interest Payment: If you do not pay your credit card bill on time, the interest rate may increase. Then you will have to pay heavy interest apart from the processing fee.
