As the eviction moratorium ends, you might be weighing your financial options to be able to stay in your apartment and get caught up on payments. If you have a credit card with credit available, it might be tempting to pay your rent with that card.
The good news is that many landlords today will accept credit card payments. In April 2020, the second month of the global pandemic, property technology company Zego reported that the number of tenants using credit cards to pay rent grew by 30%. Similarly, digital payments rose by 25% that month. In the first six months of 2020, Zego reported, credit card usage for rent rose by 43% compared to the same time period in 2019.
Even if your landlord doesn’t accept credit card payments directly, you might be able to pay rent via Venmo, Paypal or another peer-to-peer payment service that can charge your credit card for the transaction. You can also use a digital wallet like Apple Pay linked to a credit card.
If you’re faced with the choice of taking out a cash advance on your credit card to pay your rent or using a P2P service linked to your card, you will almost certainly pay less in fees by using a digital service. For instance, Chase Freedom charges a cash advance fee of $10 or 5% of the transaction, whichever is greater. If your rent is $1,098, the average U.S. rent for a one-bedroom apartment last year, you’d pay more than $50 in fees by taking out a cash advance.
On the other hand, most P2P services pass the fees onto the seller. In the case of PayPal, it is illegal for the seller to pass those fees onto the buyer or impose any surcharge for using Paypal.
With all this in mind, if you’re facing eviction and thinking about using a credit card to pay your rent, think carefully.
Howard Dvorkin, CPA, the chairman of Debt.com, says, “Paying rent with a credit card can either be profitable or dangerous, depending on your [level of financial] discipline. If you always pay your bills on time, then using a rewards card can rack up thousands of extra points per year. But if you carry a balance and sometimes forget to make timely payments, then you’ll end up paying steep interest on top of your steep rent.”
It’s also smart to consider that using your credit card to catch up on rent payments is only a temporary solution. If next month rolls around and your financial situation hasn’t changed, will you have enough available credit to cover another rent payment on your card? And will you be able to make the minimum credit card payment when it comes due?
You may rationalize the choice by considering that charging your rent payment — even with the added fees — is cheaper than being evicted and finding a new place to live. In that case, using your credit card to pay rent for one month could be a viable solution to buy yourself time to improve your financial situation. But you’ll need to come up with another plan to secure more money so you can continue avoiding eviction.
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