Can You Pay Your Rent or Mortgage With a Credit Card?

Forget what your parents told you -- credit cards don't have to be for financial emergencies only. Credit cards offer flexibility in your budget, more protection than a debit card and the ability to earn rewards. You stand to gain a lot by charging your expenses. But what about your rent or mortgage payments?

It's Possible but Not Easy

Natasha Rachel Smith, global head of communications and public relations, and consumer affairs expert at rebate website TopCashback, says, "Paying your rent or mortgage with a credit card isn't as simple as you may think. The majority of landlords and banks accept one main method of payment for rent and mortgages: a check." Unfortunately, she explains, you can't charge your rent or mortgage without paying a fee.

That's because credit card companies charge merchants interchange fees for every transaction. These fees range from about 1 to 3 percent of the transaction amount, depending on the issuer. Your landlord or bank would have to eat the cost in order to accept credit card payments.

The good news is that it's possible to pay your rent or mortgage with a credit card using third-party services -- at a cost to you instead.

Benefits of Using a Credit Card to Make Rent or Mortgage Payments

If charging your rent or mortgage to a credit card would cost you money, why do it? Sometimes you can still come out ahead. Here are a few cases where it might make sense:

It could help you meet credit card spending requirements. Many rewards credit cards will offer new cardholders bonus points if they meet spending thresholds within a certain period of time. If you're considering an airline card that, for example, gives you a large points bonus when you spend $2,000 within the first few months of opening an account, a hefty rent payment could help you easily reach that goal and score several free flights.

[Read: The Best Rewards Credit Cards of 2018.]

"I used this approach specifically to reach the minimum spending requirements on rewards cards," says Maggie Germano, founder and CEO of Maggie Germano Financial Coaching. "My monthly spending outside of rent did not amount to enough to get the rewards, but putting my rent on the credit cards allowed me to hit those minimums." Germano says she has been able to earn thousands of rewards points that she wouldn't have been able to get otherwise.

The ongoing rewards might exceed the penalties. Rewards credit cards are a great way to earn points and money back on purchases you have to make anyway. But not all rewards cards are created equal.

Lindsay Sakraida, director of content marketing for DealNews, a consumer deal site, explains that it's common for rewards cards to pay 1 percent back on general purchases. "If the service [to pay with a credit card] charges a 1 percent fee, then you're merely breaking even. If the service charges more, then you'll actually lose money in the transaction."

So, if the fee is worth more than the rewards, paying your rent or mortgage with a credit card could be a smart move. "But this isn't going to be the case for the majority of consumers," notes Sakraida.

It gives you flexibility. Finally, using a credit card to pay your rent or mortgage might be a good option if you find yourself short on cash and need to float the bill until payday. "In theory, you could charge the rent or mortgage payment, and still pay off the balance in one billing period, before you owe interest," says Sakraida.

However, this isn't ideal. If you aren't able to pay the balance by the end of the month, you end up paying interest on your rent or mortgage in addition to the initial fee. This can easily spiral into a debt problem that's hard to dig out of, especially if you're regularly spending beyond your means.

Even so, most people find themselves in a financial pinch every now and then. A credit card is a much safer option than a predatory payday loan. "Paying with a credit card can be a fail-safe if you need it, but you shouldn't consistently rely on it because that doesn't remedy the core problem," says Sakraida.

Drawbacks to Paying With a Credit Card

Despite the benefits, there are some drawbacks to paying your rent or mortgage with a credit card.

Fees

The typical fee to pay your rent or mortgage with a credit card is about 3 percent, according to Germano. "For me, that made my rent an extra $30 or so a month," she says. However, at the time, Germano says it was worth the added cost because the credit card rewards she was earning were worth more.

[Read: The Best No-Annual-Fee Credit Cards of 2018.]

The best way to evaluate whether paying a fee to use a credit card is worth it is to sit down and do the math.

Increased Credit Utilization

One of the major factors that affects your credit score is your credit utilization ratio. This measures how much credit you're actually using compared with the total amount of credit you have available. For instance, if you have a credit card with a limit of $5,000 and you're carrying a balance of $1,000, your credit utilization ratio is 20 percent.

According to Smith, keeping your utilization at 10 to 30 percent is ideal. "The smaller the ratio ... the more responsible a borrower you are perceived to be and the higher your credit score will go," she says. So if you have a low credit limit or are already carrying a high balance, charging your rent or mortgage could put your ratio too high and have a negative impact on your credit. And this can happen even if you pay your balance every month, as your balance is often reported to the credit bureaus on a different date than your payment due date.

Interest

As mentioned above, carrying a balance on your credit card means paying interest in addition to the cost of your rent or mortgage payment. With the average credit card interest rate at 16.84 percent, according to Bankrate, failing to pay off a $2,000 rent payment by the due date would mean tacking on an extra $28 in interest to the next month's balance.

"Make sure you always have enough money to pay off your credit card each month," says Germano. "Using a credit card to pay your rent is not a free pass. If you worry about your ability to pay off your credit card, continue to pay through your checking account."

Late Checks

Finally, a potential drawback to charging your rent or mortgage through certain third-party services is that you can't deliver the rent check yourself. "You have to put your landlord or management company's address into the program, and they cut and mail the check directly," explains Germano. "My landlord received my check late one month, and I had no way of proving that it had been mailed and delivered on time. I ended up having to pay a late fee," she says.

[Read: The Best Starter Cards for Building Your Credit.]

To ensure you don't end up negating the benefits of paying your rent or mortgage with a credit card, process your payment well ahead of your due date.

Tools That Let You Make Rent and Mortgage Credit Card Payments

-- Cozy: This property management software allows renters to pay their landlords via a debit or credit card for a 2.75 percent fee. As an added bonus, rent payments are reported to Experian, so you can build your credit by making payments on time. The only catch is that your landlord will need to use the service as well.

-- Plastiq: This service allows you to charge a credit card for a number of expenses that you'd traditionally write a check for, such as your tuition, taxes, rent and mortgage. Plastiq sends the check on your behalf. The cost to use the service is 2.5 percent or less of the transaction amount.

-- RadPad: RadPad lets you charge rent to a debit or credit card, as well as split rent among roommates. Your landlord doesn't have to use the service in order for you to. Credit card transactions are a flat 2.99 percent.

-- Rentalutions: This software for landlords also offers tenants the option to pay rent with a credit card. The service charges 3.5 percent per transaction.

-- RentMoola: RentMoola takes the concept of paying rent a step further by offering rewards in the form of MoolaPerks. This service requires approval from your property manager and costs 2.99 percent per transaction.

-- RentShare: RentShare is another online service that allows tenants to split costs among roommates and pay rent with a bank account or card. Debit and credit card transactions cost 2.99 percent.

-- RentTrack: RentTrack reports payments to all three credit bureaus so you can build credit for paying your rent on time. Credit card payments cost 2.95 percent each.

-- SparkRental: This service completely eliminates the need for paper checks by depositing tenants' credit card payments directly into their landlord's account. Both parties need to be signed up for the service. Renters pay a 2.99 percent fee.

-- Venmo: The peer-to-peer payment app Venmo allows you to send money to just about anyone for just about anything. If you can persuade your landlord to accept rent payments via Venmo, you can debit the transaction for free or pay 3 percent to charge your credit card.

Paying your rent or mortgage with a credit card is usually not a habit that's encouraged by personal finance experts. But if you're a responsible spender and have a lucrative rewards card, paying with your credit card could be a smart financial move. It's up to you to crunch the numbers and decide whether it's worth it.

Casey Bond is a seasoned personal finance writer and editor. Her work has appeared in a number of major national publications including U.S. News & World Report, Yahoo Finance, MSN, The Huffington Post, Business Insider, Forbes and others. Follow her on Twitter @CaseyLynnBond.