It may seem convenient to charge your monthly rent on a credit card and earn rewards back — but it can damage your credit score. Financial expert John Ulzheimer explains.
. While experts recommend keeping your utilization rate below 30%, it's worth noting that a monthly rent payment could easily exceed this 30% maximum depending on what your total credit limit is.
Consider a scenario where your monthly rent costs $1,000 and the credit card you are using to pay for it has a limit of $5,000; that's already using 20% of your credit just covering rent. OtherFor this reason, it may be worth it to first ask your lender for aEven though credit cards can offer convenience when paying your monthly rent, there's really only one time you should use them for this purpose.
The exception to this would be if you are in a pinch one month and need to use a credit card as an emergency backup. Even then, you would need to make sure you can pay off your balance in full during your next billing cycle so it doesn't backfire and this debt doesn't linger, racking up interest fees. And if you already can't afford to pay your credit card balance in full every month, it's probably not a smart idea to start charging rent on top of it as well.
"Ultimately, paying your rent or mortgage the traditional way, from bank account funds, is still the safest option," Ulzheimer says.Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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