Using credit cards for rent payments has gained popularity, especially through third-party apps. But is it really worth it? Here’s a breakdown of the advantages, disadvantages, and things to watch out for:
How It Works & Advantages
1. Third-Party Apps Only: Rent payments via credit cards are processed through apps like CRED, RedGiraffe, or Paytm.
2. Setup Process:
- Download the app from Google Play or App Store.
- Sign in and add your landlord’s details (name, mobile number, PAN, bank account, IFSC, or UPI).
- Add your credit card and set up autopay if needed.
3. Interest-Free Credit: Enjoy up to 50 days of credit before repayment.
4. Potential Rewards: Earn cashback, gift vouchers, and bonus points (though often offset by service charges).
Fees & Charges
- Apps typically charge 1% to 1.5% of the rent as service fees.
- Some platforms offer lower fees, starting from 0.39%, but it varies.
- Additional bank charges may apply if the issuer discourages rent payments.
Are There Limits?
- Most apps cap monthly rent payments, with limits refreshed each month.
- Some apps don’t allow rent payments below ₹2500.
- For higher amounts, you may need to upload a rental agreement.
Disadvantages to Consider
1. Credit Utilization Impact: High rent amounts can push your credit utilization ratio up, especially on entry-level cards, negatively affecting your credit score.
2. Additional Costs: Service charges + bank fees = diminished rewards.
3. Grey Area:
- Landlords are not merchants, and credit card payments require merchant KYC.
- Apps act as intermediaries (super merchants), creating ambiguity in regulatory norms.
Should You Pay Rent via Credit Cards?
While rent payments through credit cards may offer short-term perks like interest-free periods and rewards, the costs often outweigh the benefits:
- Service charges negate cashback/rewards.
- Risk of hurting your credit score.
- Lack of clear regulatory norms.