Is it wise to pay the rent by credit card?

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Sachin, a one-name resident of Vijaywada in Andhra Pradesh, started paying the rent for the house using his credit card through Cred for convenience. He had been using the app for his credit card payments for a long time, and the rent payment feature allowed him to add another recurring payment to the list.

“I casually got used to this feature because it saves me having to remember the payment every month,” he said. However, Sachin is cautious about using credit cards. “I don’t use credit cards for other expenses and make sure to pay bills in full within the interest-free window.”

What about the transaction fees he has to pay for each payment? “Yes, I realize there is a cost, however small, for convenience. Also most of the time the service fee is waived on the Cred coins accumulated in my account,” he said.

Like Cred, many platforms like Mygate, Nobroker, Paytm, PhonePe, and Magicbricks, among others, allow users to pay rent by credit card. As with most credit card transactions, cardholders can earn rewards.

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What is offered

All you need to do is add the owner’s bank details or UPI (unified payment interface) address under the recipient option and complete the transaction. You must provide your landlord’s PAN details if payment exceeds 50,000. Some platforms may ask you to add the address of the property, but you do not need to upload the rental agreement, old rent receipts or any other supporting documents regarding the rental. “We have an automated risk mitigation system to monitor all rental transactions. If there are any discrepancies or a transaction appears to violate the purpose of the service, we request a rental agreement to finalize the transaction,” Praveen said. Boda, CFO of MyGate.

Some platforms may ask you for a rental agreement if the monthly rent exceeds a certain limit predetermined by the platform. When it comes to rewards, each platform has its own reward system and this can vary depending on the cards the platform links to. Raj Khosla, founder and managing director of MyMoneyMantra.com, said the offers on the rent payment feature are transitional in nature and users may not always get rewards. For example, Sachin has yet to earn cash back or other rewards on the four rent payments he has made so far.

Should I use it

“Paying rent by credit card is certainly rewarding because you get system-generated rent receipts, extra cash through the 45-50 interest-free repayment window; Reward points; ease of automated payments and the convenience of paying rent even when there is a lack of funds,” Khosla said. But, he added, the compounding benefits come at a cost that also requires you to stay fiscally disciplined. Most platforms charge a service or transaction fee on this feature (see table). Since the platform does not charge the MDR (merchant discount rate) to the owner, who is the merchant in this case, it charges the user paying rent as a transaction fee.

Failure to pay the credit card bill or even pay the minimum due attracts interest on principal that can swell to over 30% per year. Customers should also be careful not to frequently exhaust the credit limit, as high credit card usage can cause lasting damage to credit rating.

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