It is no brainer that rental payment is a recurring expense. So, it is wise to use your credit card for this expense. Right? Typically, any payment made through a card could be seen as the money on credit. Therefore, one may avoid it as much as one can. But as they say that the ‘devil is in the details’. Here, we try to deconstruct the same.
What if you want to earn some rewards while making the payment of rent? And when you repay the credit card bill well in time, it allows you to make use of a 45-day interest free period. However, there could be additional charges as well.
So, if you are also contemplating paying rent with a credit card, keep in mind these five points.
Rental payment via credit card: Key points to know
I. Charges: Most card issuers allow rent to be paid through credit card by levy of a service charge which could range between 1 to 2.5 percent. This means if you are paying a rent of ₹50,000, there could be an additional cost in the range of ₹500 to ₹1,250.
II. Quasi cash: Some card issuers consider rental payment as a quasi cash transaction, thus rendering it ineligible for reward points. So, it is recommended to check the terms and conditions of the card-issuing bank.
III. Raising your credit utilisation: Payment of rent through card leads to higher credit utilisation, thus impacting your credit score for the time being. Therefore, if you have several other expenses lined up during a month, it may be better to refrain from using a credit card for making payment of rent.
IV. Rent receipts: Platforms that you are using to make the payment of rent could also provide the receipts that could be used for claiming HRA exemption. However, the convenience fee levied on it is not reflected in the rent for obvious reasons.
V. Flexibility: All in all, using a credit card may be a good option to pay rent with flexibility of 45-day interest free period and cash rewards or cashback (based on the card you use). However, if you do not stand to get any of those, you may want to reconsider it for payment of rent.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
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