As digital transactions become immensely admired in India, numerous tenants are exploring the opportunity of paying their monthly rents through credit cards.
This particular method provides several benefits such as cashbacks, reward points and improved cash flow management. Still, it is crucial to acknowledge and understand the associated fees and regulatory considerations.
Key considerations before paying rent through credit cards
- Processing fees: Most of the platforms charge a convenience fee for credit card transactions. For example, the Freecharge application charges 0.9% + GST whereas others may charge up to 2.5% + GST. The fees discussed here are illustrative in nature. For the updated details on fee charges refer to the respective website of the platform.
- Interest-free period: Credit cards offer an interest free period of up to 45-50 days. This provides temporary relief in cash flow management and financial planning.
- Impact on credit score: Consistent and timely repayment of credit card dues can influence your credit score in an immensely positive way. Still, consistently high credit utilisation may have adverse effects.
- Reward exclusions: Not all credit cards provide rewards on rent payments. Some credit card issuers exclude them or provide reduced or limited discounts. That is why it is always prudent to check your credit card’s terms and conditions before proceeding.
- Regulatory oversight: While the Reserve Bank of India (RBI) has not issued any specific restrictions or prohibitions against using credit cards for P2P transactions such as rent payments. Still, all such transactions may still be flagged by banks or digital payment platforms due to concerns over credit misuse or regulatory compliance. On a holistic account all such transactions come under the broader purview of RBI’s efforts to ensure responsible credit usage and reduce systemic risk in the unsecured lending space.
Conclusion
Hence, paying rent through credit cards is a feasible option and can offer several benefits. Still, it is important to be careful of the associated fees, applicable interest rates, and regulatory landscape
That is why on your part you should always ensure timely repayment to avoid interest charges and potential negative impacts on your credit score.
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.