Credit card rewards can bring you lucrative cash back or travel rewards miles and points. With rent making up one of your biggest monthly expenses, if not your biggest expense, you may be interested in using a credit card to pay rent to earn rewards.
There is some good and some bad news here. While you can use your credit card to pay rent, it is not fee free. Let’s take a look at how those costs stack up and compare to the rewards you earn as we examine how to pay rent with a credit card.
Pay rent with a credit card: Cost-benefit analysis
The factor to consider when deciding if you should pay rent with a credit card is how much it costs versus what you get back. Depending on the rewards credit card you choose, you can earn somewhere between 1% and 5% in cash back or rewards.
It is important to know exactly what you get back in rewards before deciding if you should pay your rent with a credit card. If the costs are more than what you get back, paying rent with a credit card is a bad deal. (The same goes with mortgages)
Paying your rent with a credit card is not free. You will likely find yourself paying around 2% to 3% in fees depending on the card and rent payment service you use. You have to earn more than your costs to make it worthwhile.
To better understand, let’s look at an example. Let’s say you have the Chase Sapphire Preferred credit card and earn 1 point per dollar spent outside of bonus categories. If your rent is $1,500 per month and you put it on a card, you would get 1,500 points back. Based on the value of Ultimate Rewards, that is worth about $18.75 in rewards.
If you pay 2.5 percent in processing fees, your cost to pay that $1,500 rent with a credit card is $37.50, well over the $18.75 you get back. So to make it worthwhile, you only want to pay rent with a credit card when you get more back in return.
How to pay rent with a credit card
When it comes time to actually pay your rent with a credit card, you have two general options:
- Pay through your landlord’s rent service
- Pay with a 3rd party payment processing service
If you want to pay rent through your landlord’s service, you are stuck paying whatever fees the provider charges. For example, 3% is standard, which is likely more than you will earn back in rewards from any credit card in your wallet.
The most popular service among credit card rewards enthusiasts for paying rent (or mortgage) with a credit card is Plastiq. Plastiq typically charges 2.5% in fees, which is lower than the standard 3% mentioned previously.
Sometimes Plastiq runs promotions for certain cards brands, like Mastercard or American Express cards. In those cases, you can sometimes find a better rate from Plastiq than your landlord charges. But for typical monthly rent payments, it usually doesn’t make sense to pay with a credit card.
Paying your rent with a credit card to earn a big bonus
So if you end up spending more to pay your rent with a credit card than you get back in rewards, when does it make sense to use a credit card for rent? There is one scenario where what you get back far outweighs the costs: signup bonuses.
A few years ago, Citibank ran a deal for the American Airlines Executive credit card for 100,000 bonus points when signing up for a new account. The catch was you had to spend $10,000 within three months to earn the bonus.
With a deal that good, both my wife and I signed up. That meant we had to spend $20,000 on credit cards in 90 days to get 200,000-points. Challenge accepted!
In this case, we used a combination of techniques to rack up spend as quickly as possible. That included gift cards, pre-paying some bills, and shopping in bulk to stock up on staples. But spending that much might mean you have to be creative.
One great way to add spend is paying your rent with a credit card. Considering 200,000-miles was enough for four round-trip flights to Europe, spending $30 in fees a few times is no big deal. In this case, the fees were worth paying for well over $2,000 in free flights.
Pay your rent with a credit card… only when it makes sense
If you are ready to go all-in on credit card rewards, welcome to the club! One strategy to quickly build your balance is paying your rent with a credit card. Just do the math each time you pay to make sure you get back more than you spend. If you will earn more, go forth and pay rent!
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This article was last updated May 22, 2018 but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.