Financial tip of the day: Charge the rent to your credit card?
Posted by: in Stocks Money NewsFiled under: Personal finance
Charging the rent to your credit card sounds insane — it seems like it would be the eighth deadly sin, tied with going to a payday lender to get gambling money.
But as the New York Times points out, the strategy can be great if you’re in good financial shape: If you pay off the balance each month you pay no interest, and you can rack up rewards on your credit card — possibly round-trip airfare anywhere in the country each year if you have high rent!
But there are some pitfalls: Because of the way FICO scores are calculated, drawing down a large percentage of your available credit, even if you pay it off each month, can hurt your score. So if paying your rent by credit would leave you with little additional credit available, it might be a bad idea — something that you cost you thousands on your mortgage when you do buy your own home.
The Times also points out, somewhat obviously, that if you can’t afford to pay off your rent in cash each month, you shouldn’t put it on your card. But if you can’t afford to pay your rent out of your monthly income, that’s a whole other problem…
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