Can you pay rent with a credit card?

The short answer is yes, but it might not be the best thing to do. Using your credit card to pay your monthly rent could mean paying interest and additional transaction fees. If managed properly though, it can also add positive indicators to your credit report, giving your credit score a boost. 

Whether extra fees kick in or not depends on your landlord's policies, the type of payments they accept, and how you manage your credit.

Let's look at the benefits and drawbacks of paying rent with a credit card – and whether it’s the best option for you.

The advantages

With proper management – such as maintaining your monthly payments and paying at least the minimum amount owed – there may be positives to using your credit card for rent payments.

• It could positively affect your credit health. But you’ll need to consistently make payments and stay within your credit limit.

• You could earn rewards, cashback, and points. Many lenders offer perks for using your credit card. 

• It offers flexibility and convenience. After the payment is set up, your landlord just needs to charge your card, giving you more flexibility with cash flow should you need it.

The disadvantages

Not managing your credit card properly can result in some serious drawbacks, so keep these in mind.

• The possibility of incurring high interest. If you’re unable to cover what you owe monthly, you’ll likely end up having to pay interest, and in some cases, additional late payment charges. Rent is typically one of the larger monthly expenses a person has, so the interest builds up quickly with any late payments.

• There might be additional processing fees. If your landlord accepts credit card payments for rent, it might seem just like using a debit card to pay one of your bills. But credit cards may come with additional processing fees that you wouldn’t typically pay when doing a bank transfer.

• It could have an impact on your credit utilisation rate. A credit utilisation rate is your actual credit usage compared to your credit limit. Your credit utilisation rate is calculated as a percentage of your total limit. 

Note: For example, if your credit card limit is £2,000, and you’ve spent £500, your credit utilisation rate will be 25%.

Being the highest monthly expense for many, rent will likely form a large percentage of your total monthly credit limit, resulting in a high credit utilisation rate. 

Your credit utilisation rate can be taken into consideration when calculating your credit score, and it’s a factor that lenders might consider when deciding on the outcome of a pending application.

It’s generally considered best to keep your credit utilisation score between 30-40%, because this range indicates that you use your credit card often, but don’t rely on it to get through each month. 

Increasing this percentage by paying your rent with your credit card could signal that you’re heavily dependent on credit. So if a lender does take your credit utilisation rate into account, a higher percentage may work against you.

How to pay your rent with a credit card

While it’s possible to pay your rent using a credit card, it might not be the most convenient or cost-effective method.

Bigger rental companies usually accept card payments, which means they may be able to charge your credit card monthly without incurring extra fees. But if your landlord generally only uses bank transfers as a payment method, this could cause some complications.

Here are the options you have for paying rent with a credit card, depending on what your landlord will accept:

• A direct agreement with your landlord. Some landlords accept card payments, and this involves them charging the rent directly to your credit card each month. Not all landlords have the facilities to do this, and it’s usually only landlords who are part of a larger organisation who will offer this as a payment option.

• Using third-party payment processors. Many landlords don’t accept card payments, and in this case, you could opt to use a third-party payment service.

Note: A third-party payment processor is a service that allows businesses to accept credit card and online payments. Some examples of third-party payment services include PayPal, GoCardless, and Stripe – but there are others.

Using a third-party payment processor, you’ll be able to pay your rent with your credit card even if card payment to your landlord isn’t an option. The funds will be taken from your credit card, processed by the third-party, and deposited into the landlord's account.

What you need to be aware of with third-party payment processors is that there are often transaction fees included. This is usually a flat-rate fee and an additional fee, which is a percentage of the total transaction. Landlords and tenants will usually both have to sign up to the third-party payment service in order to pay and be paid through it, so it’s something your landlord would need to be using already, or be willing to set up.

• Using a cash advance to pay rent. If your landlord doesn’t accept card payments and doesn’t want to use a third-party payment service, using a cash advance is another option. 

You can take a cash advance by withdrawing money from an ATM, which is a way of immediately obtaining funds from your credit account. If the landlord accepts cash, this money can be paid directly to them. Otherwise, if you’ve previously agreed to pay by bank deposit, that’s another option. 

But there are some potential drawbacks to using cash advances, including:

• Increasing your credit utilisation ratio. Cash advances might not directly affect your credit report, but they could impact it by increasing your outstanding credit card balance. This can potentially increase your credit utilisation ratio too, which in turn may lower your credit score if not managed well.

• Fees. A cash advance usually comes with an immediate fee (this will vary between different credit providers). You’ll likely also have to pay immediate interest on the amount you withdraw.

• Immediate (and possibly higher) interest payment. When you use your credit card for regular spending, there’s generally a grace period in which you don’t pay interest. But with a cash advance, you usually start paying interest straight away, often at a higher rate.

Things to keep in mind

Choosing whether or not to use your credit card to cover your monthly rental payments is a decision that shouldn’t be taken lightly, and various factors may determine whether it’s the right financial decision for you.

• Your debt-to-income ratio. This is the percentage comparison of your gross monthly income to your monthly debt. 

Individual credit providers have their own figures on what they consider an acceptable or healthy debt-to-income ratio. Your ratio won’t always directly impact your credit score, but it can be used as a measure for determining whether or not you would qualify for more credit. It also offers insight into your financial health.

If your debt-to-income ratio is already high, using your credit card to pay rent might not be a good idea. Otherwise, using your card could further increase this ratio to a point where lenders might hesitate to approve you for more credit.

• Credit limit and availability. One of the most straightforward factors to consider is whether or not your credit limit covers the cost of your rent. If it’s below your rent amount, you won’t be able to pay your monthly rental costs with it.

If your credit limit is higher than your rental amount and you can cover your rent with it, you’ll need to see if you have credit availability – essentially, whether or not you have enough credit available in your account to cover your rent. You might have to pay off some of your credit card balance before you can charge a month's rent to it.

• Interest rates and terms of your credit card. It’s best to familiarise yourself with your credit card’s interest rate and the terms of payment, as well as any additional fees. Working out the interest and additional costs associated with using your credit card to pay rent can help you decide if it’s worth it for you.

Will paying rent with my credit card affect my credit score?

Charging your rent to your credit card won’t affect your credit score in itself, but doing so can lead to situations that might, like:

• Missed payments. Since rent is a significant expense, it’ll take up more credit. So if you’re low on credit because of other expenditures, you might end up missing payments. Whatever your reason for missing it, if you’re just a couple of days late making your payment, it usually won’t have a big impact. But if you go more than a month without paying, a missed payment will affect your credit score.

• Using a cash advance. A cash advance, whether a withdrawal from an ATM or a bank transfer from your credit card, won’t always directly affect your credit score. 

However, it can increase your credit utilisation ratio, which may impact your credit score. It also adds additional fees and interest (which are often charged with cash advances).

• Using a high volume of credit. Even if you don’t miss any payments, using a high volume of credit can increase your credit utilisation rate/ratio, which may affect your credit score. 

If paying rent on your credit card each month negatively affects your credit, it can impact your financial prospects and whether or not you could be approved for a loan, or even a mortgage in the future. 

But paying rent with your credit card can potentially count towards improving your credit score by demonstrating a pattern of making on-time, consistent payments. 

To recap:

While it’s possible to use your credit card to pay rent, there are important factors to consider. First is whether your landlord will accept card payments. If they don’t, extra charges will likely apply, making the arrangement less affordable.

If you do decide to go for it, you’ll need to make consistent and timely payments to avoid any additional fees and interest charges. Done right, using your credit card for rent can be a good way to build up reward points and even get cashback from reward schemes – all by just paying your monthly bills.