Many tenants these days are paying their house rent using credit card and taking the additional credit period to settle the amount. However, using such a payment option can have an adverse impact on your finances.
Portals offering card payment
Recently, housing.com launched a ‘Pay Rent’ platform that allows tenants to pay rents using their credit cards. The amount is transferred to the landlord’s bank account directly. Credit card payment app CRED has also introduced new feature, CRED RentPay which allows users to pay rent using a credit card.
Other portals such as, NoBroker.in and RentPay also allow payment of rent through credit cards.
There are no charges for registering, but you will incur additional cost when you make transactions on their websites – by using a credit card to pay your landlord.
You will need the landlord’s bank account details, PAN number, etc. when you register.
Also, you will have to submit rental agreement if the amount is more than Rs 50,000 per month or whenever the app or website wants to verify the details.
NoBroker.in charges Rs 400 plus Rs 78 as Goods and Service Tax (GST) for Rs 20,000 paid as rent.
These websites do not provide an auto pay facility. So, you will have to make a transaction every month if you want to use your credit card for rent payments.
You can save some cash for any contingency if you are going through a financial crunch. Additionally, you earn reward points for using the credit card.
Also, you will receive the rent receipts in your registered email ID. These can be used as proofs to claim tax benefits. You don’t need to chase your landlord for rent receipts at the end of the financial year. This works because as soon as the platform (from which you pay your rent) deposits the money in your landlord’s account, a rent receipt is generated automatically.
What doesn’t work?
Credit card debt is the very expensive. Warns Aman Kapoor, chief engagement officer at Credit Sudhaar, “In case you are unable to repay the credit card bill, the outstanding balance gets charged at an interest rate of about 3-4 three per cent every month, which works out to 36-48 per cent on an annualised basis.”
Failure to repay the minimum amount due on the credit card will attract an additional late payment fee of Rs 1,000 (varies from bank to bank).
Further, “Your credit score gets damaged if you don’t pay your credit card bill on time or revolve the outstanding balance by paying the minimum due amount,” says Harshil Morjaria, a certified financial planner of ValueCurve Financial Solutions.
Too much use of your credit cards can throw your finances into disarray. In any case, paying rent by credit card only gives you a leeway of about 45 days. If you find yourself in financial difficulty meet your landlord and explain your situation. Request him/her to give you a grace period of two to three months for paying the rent. In the worst case scenario, redeem existing investments or borrow from family or relatives, if that’s viable and pay the rent.