Should I pay my rent with a rewards card?

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Rewards cards are inherently seductive. Each time you use one, you get a percentage in return. The occasional $15 charge may not rack up quick rewards, but a monthly average $1,500 rent payment? Now that will add up! 

In the past, paying rent with plastic has not been an option. Landlords accepted cash or check only because they didn’t want to assume the transaction fees. Today, some do, especially when large building management companies are involved. 

If your landlord doesn’t accept card payments, a third-party service will. These services charge your card then pass the funds to your landlord. You will be responsible for the fees, however, which are typically 2.5% to 3% per transaction. If you go this route, do the math to make sure you’re still coming out ahead.

The biggest concern about using a credit card for your rent payment is that you don’t collect a high balance and pay interest. You should only consider this method if you are sure to pay your card off every month.

If you’re absolutely committed to the idea of using a rewards card for your rent, use the right type. Here are four kinds of cards that are best, with an account example for each.

Paying your rent with a charge card

Charge cards are smart alternatives to credit cards for making substantial monthly payments. While credit cards allow you to maintain an everlasting debt as long as you send the minimum payment, charge cards must be repaid in full each billing period. A good charge card will not only ensure that you’re always in the black, but give you impressive rewards. 

American Express is the major issuer of charge cards, and their Platinum Card can be right for rent, if you’re also a big traveller who likes luxury perks. You’ll receive 65,000 points after you charge $5,000 within the first three months of opening the card. Depending on your rent payments, that shouldn’t be hard to meet. 

Those sign-up points are worth a bit more than $500. You’ll earn 5x points when you book flights and hotels and 1x points on everything else (like your rent). The annual fee is $550, but it offers $500 in combined credits that you can use for travel and shopping every year, so it’s nearly a wash.

Debit cards can reward you, too

A debit card that lets you earn rewards can also be a way to let your rent payment work in your favor. The transaction fees are usually less than they are for credit cards, and you can’t get into debt because you’re using your own funds instead of borrowing money.

With Discover’s Cashback Debit account, you can earn 1% cash back on up to $3,000 in debit card purchases each month. There are no monthly fees or balance requirements. If your landlord assumes the transaction fees, you can earn $180 a year, just for your rent alone. But because it’s a checking account, you’ll probably use it for many other expenses, so the rewards will be far greater when you do.

Make your monthly rent payment with a cash back card

Cash back credit cards offer a higher percentage back than checking accounts. An ideal choice is one that offers a high flat rate for any purchase, such as Alliant Cashback Visa Signature credit card.

In the first year of opening it you will earn 3% cash back on everything you charge. After that you’ll earn 2.5% back. This card has an annual fee of $99, which is waived the first year.

So how much money can you actually earn with a card with this type of a rebate? Assuming $1,500 rental payments over a year in the 3% period, you’d earn $540. In subsequent years it would be $450. Subtract the annual fee and your net annual gain would be $351.

Your rent payment can earn you points or miles

Another option for a rewards card is one that allows you to earn points or miles with use. Depending on the card, you can redeem what you earn to book travel, get cash back, purchase merchandise from the company’s shopping portal or buy gift cards. As with all rewards cards, the more you charge, the more you’ll earn.

The Bank of America Premium Rewards credit card is an example of a point-based credit card that can work well for monthly rent payments. It offers two points for every dollar you charge on travel and dining purchases and 1.5 points for every dollar you spend elsewhere. It comes with 50,000 bonus points after you charge at least $3,000 in the first 90 days of opening the account, though it has a $95 annual fee, so the net gain would be $405.

Assuming you charged a rent payment of $1,500 every month for a year, you’d earn 27,000 points.

Bottom line

Of course, staying out of debt will be essential, so if you do use a charge or credit card for your rent, be sure to pay it down to zero with the money in your checking account. If you don’t and then roll balances over, the applied interest will nullify any rewards you get.