When you are feeling financially strapped, it may be tempting to use your credit card to pay your rent or mortgage. Credit cards allow you to postpone coming up with the money for payments, and you can get rewards like cash back or miles for using them. Unfortunately, there are also costs and consequences for credit card use that can get you deeper into financial trouble.
People who don’t pay what they owe in a timely fashion or only pay the minimum balance on credit cards wind up in situations where debt snowballs quickly, accumulates and never gets paid off. The average credit card interest rate is 14.87 percent, and the average household pays a total of $904 in credit card interest each year, according to NerdWallet. Adding high-ticket expenses like rent or mortgage payments to your balance can lead to mounting debt you are unable to meet.
The skilled and seasoned Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer understand that even the most well-intentioned people can find themselves in a financial hole. We offer a free consultation to evaluate your individual financial situation by looking at your debts, your income, and your goals and coming up with a debt-relief plan that’s best for you. Call one of our conveniently located office branches or email for your free consultation.
Paying by Credit Card
There are advantages to using a credit card to pay your rent or mortgage. It gives you flexibility if your payment is due before you get a paycheck, since you can pay the credit card after your check arrives. If you can manage to repay the charge before the end of the billing period, you won’t have to pay interest.
However, few landlords accept credit card payments, often because the credit card companies charge them 1 to 3 percent merchant fees. If this is the case, you can use a rent payment service to make payments, but this will be for an additional fee.
For cards that give you perks, if you spend a certain amount within a fixed period of time, the extra charges could help you meet credit card spending requirements. If the perks are substantial, such as for a free flight, this may be worth more than the fees you will pay.
Also, if you are getting cash back on the card that meets or exceeds the fee, you could break even or actually come out ahead. However, this is not usually the case, so you need to calculate costs carefully before using your card.
Disadvantages of Paying With a Credit Card
Before paying your rent or mortgage with a credit card, you should consider the drawbacks:
- Fees — Fees are usually about 3 percent, so consider whether the convenience is worth the cost.
- Interest — If you fail to pay off your balance, you will have to pay the high credit card interest rate on your rent or mortgage.
- Increased Credit Utilization — How much of your available credit that you actually use is called your credit utilization ratio. It is advisable to keep your utilization at 10 to 30 percent, because going too high affects your credit score. If you have a low credit limit or are already carrying a high balance, charging your rent or mortgage could raise your ratio and negatively impact your credit, even if you pay your balance every month.
- Late Charges — If a third-party service is involved and they don’t make your payment on time, you may wind up having to pay a late fee.
If you’ve examined all your options and still feel that paying your rent or mortgage with a credit card is the best one, here are some services you can use:
If you have gotten yourself into a financial situation where even paying your rent or mortgage with a credit card will not help, you may want to consider the fresh start available by filing for bankruptcy. Bankruptcy is a legal way to have many debts forgiven. The most common types are Chapter 7 and Chapter 13. Chapter 7 is a full liquidation of all assets that will eliminate many debts including those for credit cards. Chapter 13 may allow you to keep property, such as a mortgaged house, while you complete a three- to five-year affordable payment plan to have debts forgiven.
Contact Us and Get Help
While paying with a credit card is safer than some alternatives, like taking out a payday loan, you cannot rely on it or use it repeatedly to remedy your basic financial problems. It makes more sense to take lasting steps toward debt relief and contact the experienced and compassionate Ohio debt relief attorneys at Fesenmyer Cousino Weinzimmer.
During your consultation, we will evaluate your entire financial situation and determine the best fit for your particular circumstances. We will make sure you are aware of all your options and help you decide on the path to a brighter future that makes sense in your individual case. We understand what you are going through and will walk you through the process every step of the way.
Delaying can only worsen your situation, so call the Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer at one of our conveniently located office branches or email for your free consultation so we can determine what debt relief solutions will work best for you.