Paying rent and getting credit for it?

March 28, 2024 5:17 AM

In a new apartment and considering rent payment options. I could pay my rent by credit card, and there would be a 3% fee for doing so. The portal where I set up the rent payment also suggested I might want to report the rent payment to the credit agencies for a $6 per month fee.

I have elected to do a direct transfer to avoid the credit card processing fee, and chose not to pay for the credit reporting.

But I am paying my credit cards in full, and wondered if any benefit to paying off this expense every month by credit card (such as increasing 'cash back' points) offset the added processing fee.

Or if there was any real benefit to paying $6 a month to report that I was making rent payments.

posted by rochrobbb to Work & Money (12 answers total)

If you have a low or no credit score having reports like this are valuable. Where I live the general wisdom is ideally you would have 2-3 sources of credit that you make regular payments on (and credit card and similar should be paid off every month) from a variety of sources. EG a credit card, a car payment, a mortgage payment. If you rent and don't have a car getting that variety is difficult.

Charging $6 for a service that actually helps the landlord more than tenants though seems outrageous.
posted by Mitheral at 5:28 AM on March 28 [3 favorites]

If you don't have any credit history and you have near future plans that would require a strong credit history (purchasing a home, financing a car), there can be a utility to paying the $6 to report that you're making your rent payments.

I rented for 15 years before buying my home and it was never necessary for me to do that. But I also used credit cards responsibly, had student loans, and had 15 years of putting utilities in my name so I had plenty of other things feeding good data into my credit history.

I'm not aware of a credit card that offers more than 3% in points except on very specialized purchases, and I don't think I've ever seen rent be one of them. I could be out of date on that info though. From what I currently know, by paying by credit card you would be at best breaking even.
posted by phunniemee at 5:29 AM on March 28

There's a credit card, Bilt, that's supposed to be specific to your need. Their ad claims that the 3% transaction fee is waived. Another tact is to use a credit card dedicated exclusively as your rent payment credit card. Citi has Custom Cash Credit Card which pays 5% on your highest spend category. American Express or one of their Hilton Honors varieties might fit but only if you use your accumulated points on staying at one of their resorts (but not their hotels). Their resorts are expensive to travel to unless you're lucky enough to live within driving distance or you've got a ton of airline miles. Most other credit cards except for the first two will cause you to lose money because you're spending money to earn it elsewhere at an overall loss.

If you're already paying your monthly credit card bill in full, then you've got a solid credit history and will receive the best mortgage offers if you buy a house. Paying separately for the monthly credit reporting isn't worth it.
posted by dlwr300 at 5:48 AM on March 28 [2 favorites]

As long as you put enough on the card to avoid the bank shutting it down for inactivity, there is no need to "manufacture" spend to improve your credit score. Credit score is mostly a function of how much credit you have access to, and how rarely you've made late payments, and how long your history of paying on time is. Credit agencies don't care how much you use the credit card each month as long as you pay on time.

But if you're willing to sign up for a new credit card, you can get points for paying your rent with a Bilt credit card without any fee. From the landlord's point of view, the payment is made by ACH or literal physical check in the mail, so the landlord does not charge you 3%. And Bilt gives you one point per $. The points can be redeemed as cash back, or you can use them for travel.

I pay rent with Bilt. It works fine. It's a bit of hassle to set up, and the first month you're kind of like "is this really going to work?". But then it works, and you get the points. The card is managed by Wells Fargo, which admittedly doesn't have a great reputation for probity, but they are a legit regulated bank. The points nonsense is managed by a VC-funded tech startup that will presumably go out of business eventually, but for now I'm happy to take their money. My rent is enormous, so I earn a meaningful amount of points doing this, and paid for many flights.
posted by caek at 6:01 AM on March 28 [5 favorites]

The one situation I can imagine making this worthwhile is if you open one of the credit cards that has a large upfront bonus dependent on hitting a high spend-target that you can only hit by using it to pay your rent. But otherwise I agree with all of the above.
posted by telegraph at 6:03 AM on March 28

As to whether it's worth the 3% fee is really just math. Do you have a credit card with a bonus of 3% or, preferably, more? And it would need to count for rent, though many credit card bonuses are categorized. I have a credit card that has a 3% bonus for online purchases, but that's all I have which could qualify. Especially since I'm not sure if the credit card company would consider rent payments "online" or not, and I would only be matching the fee, not exceeding it, it doesn't seem worthwhile to try. If on the other hand you have a credit card with a 4% or 5% cash back on all purchases, that would be worth using.
posted by Meldanthral at 6:56 AM on March 28

Note that with the Citi Custom Cash card, only certain spend categories are eligible for 5%, and none of them are rent: "restaurants, gas stations, grocery stores, select travel, select transit, select streaming services, drugstores, home improvement stores, fitness clubs, live entertainment".
posted by dreamyshade at 7:34 AM on March 28 [2 favorites]

As someone with a dubious history with credit cards there's no way I would do this. It makes your rent more expensive and if you are accidentally late, even just once, it could cost you even more and damage your credit history. There are other ways to build credit history that are free/less costly than 3% of your monthly rent.
posted by emd3737 at 12:13 PM on March 28

I pay my rent with Discover checking, I get back + - 280 a year with their one percent back checking. It is not a lot, but it is pretty painless free money. They have a $300 per year cap on what you can get back.
posted by jcworth at 2:18 PM on March 28

A 3% fee on top of your rent is probably not an insignificant amount of money, so the only way this makes sense is if your credit card offers you a really sweet deal on cashback, which is something you can only answer by looking at the cardholder agreement on that card. My bet is it carves out exceptions for just this sort of thing, though. If you have an alternative arrangement set up, I'd keep using that and not worry about it. The Bilt suggestion above is the only thing I might entertain, and even then only if I was able to set up automatic payment from my bank to the card and card to the landlord without incurring any fees doing so. It introduces yet another cog to the machinery though, so unless you really need that extra line of credit on your report, I wouldn't bother.

Given that you already have a credit card, and presumably decent credit history if you're paying it off monthly, I can't see how it'd ever be worth $6/month to report your rent payments. Maybe it'd bump up your credit score, but I don't see any reason that it would necessarily do that.

tl;dr; just keep doing what you're doing now and don't worry about it.
posted by Aleyn at 2:21 PM on March 28 [1 favorite]

Regarding the Bilt credit card...Even if your property only accepts checks, you can still pay with your card through the Bilt Rewards app and we'll send a check on your behalf.

It does seem that this credit card has mixed reviews re customer service.
posted by oceano at 11:12 PM on March 28

Response by poster: tl;dr; just keep doing what you're doing now and don't worry about it.

I think this is what I'll go with.

Thanks all for considering my question and offering advice.
posted by rochrobbb at 3:40 AM on March 29