For most Canadians, their rent or mortgage payments will be the largest expenses they pay each month. For that reason, to make payments easier it may seem like a good idea to charge them to a credit card. This is especially true if you want to use your card because it earns you rewards or cash back, or because you want to increase your credit score.
In Canada, while rare, it may be possible in some circumstances to use a credit card to pay your rent or mortgage, but it depends on the policies of the landlord or the mortgage lender. Very few landlords and lenders accept direct credit card payments because they don’t want to incur the high merchant fees that card network companies like Visa and Mastercard may charge. If they do indeed accept credit card payments check what fees may apply.
If they don’t directly accept credit card payments, all is not lost. You could still be able to use a third-party payment provider to pay with your card. A third-party service takes your credit card payment and pays your lender or landlord with the funds. They make money by charging a fee for the use of their services.
Before you get too excited about the possibility of using a third-party payment app, it’s important to be aware that there are two main considerations to keep in mind when deciding whether or not to go this route: fees and credit score impact.
Fees: Firstly, you need to be aware of the fees that are associated with using a credit card to make these types of payments. As mentioned earlier, landlords and mortgage lenders often do not accept credit card payments directly so you will have to rely on a third-party payment processor to facilitate these transactions. These processors charge a fee to use their services, which can be either a percentage of what you owe or a flat fee. These fees can really add to the cost of your rent or mortgage payment.
Credit Score: It's also vital to note that using a credit card to pay rent or mortgage can affect your credit score, depending on how you manage your payments. If you have trouble making payments on time or carry a high balance on your credit card, you’ll negatively impact your credit score. On the other hand, if you make payments on time and keep your credit utilization low, paying your rent or mortgage with a credit card could help improve your credit score.
Can I use a credit card to pay my mortgage payment?
Monthly mortgage payments can be large, ranging as high as several thousand dollars. Using a credit card can be an attractive possibility, especially if you're facing a temporary cash flow issue or looking to earn rewards. However, it's not a common payment method, and most mortgage providers will be reluctant to accept a credit card because of high merchant fees. For that reason, it may require extra effort on your part and you may have to set up credit card payments via a third-party payment app like Plastiq or PaySimply.
These processors typically charge high fees for their services. These fees can either be a percentage of the amount you owe or a flat fee (starting from about 2.5%). Be sure to keep these fees in mind when deciding whether to use a credit card to pay your rent or mortgage.
Can I pay rent on a credit card Canada?
Because rent tends to be less than mortgage payments (though not always, especially in bigger cities) you might have a better chance of paying your rent with a credit card. Especially if you rent from a large property management corporation. On the other hand, people just renting out a basement apartment in their home and small rental companies are not likely to take credit cards.
That being said, you may be able to use a third-party service like PaySimply or Rentmoola. If you decide to give it a go, be very cautious about potential fees, which start at about 2.5% and can go even higher. It's essential to take into account the fees you might pay when using a credit card for rent because, over the cost of a year, they could add hundreds to your payments. Additionally, if you choose to pay rent with a credit card, make sure you have a plan to pay off the balance in full each month to avoid accruing interest charges. Credit cards typically have high-interest rates, which can accumulate quickly if you carry a balance.
How to Pay Your Mortgage with a Credit Card
To pay your mortgage with a credit card your first step would be to find out if your mortgage provider accepts card payments. If not, you’ll have to search for an appropriate third-party payment service. You can check out the website of companies like PaySimply to see which mortgage companies they serve. You’ll then need to create an account using your email and provide other personal information.
When you use a third-party payment site to pay your mortgage, the company actually pays your mortgage provider directly, typically via e-transfer, but it could take a few days to be processed so don’t wait until the last minute. Fees for paying your mortgage via payment processor ranges anywhere from 2.5% to as much as 2.9%.
How to Pay Your Rent with a Credit Card?
It’s always worth asking if your landlord accepts rental payments via credit card. If not (which is very likely the case) you could use a third-party payment processor like Rentmoola or PaySimply.
Generally, you would first need to set up an account and provide your personal and credit card details. You can then schedule one-time payments each month or set up monthly recurring payments. You’ll typically be charged 2.5% of your rent payment, though fees are always changing so it’s advisable to contact the payment company to inquire about fees. Rentmoola also states on its site that if you use them to make payments, you could earn additional MoolaPerks rewards on top of any rewards you might get with your credit card —which could be a nice little perk.
The pros and cons of using a credit card to pay your rent or mortgage
Using a credit card to pay your rent or mortgage has both pros and cons.
Rewards: Many credit cards feature rewards or cashback for every dollar you spend. By using a credit card to pay your rent or mortgage, you can earn rewards that can be redeemed for travel, gift cards, statement credits, and more.
Convenience: Paying your rent or mortgage with a credit card can be convenient. You can set up automatic payments and not have to worry about making payments.
Building credit: If you use your credit card responsibly and make your payments on time, it can help you build your credit score, while paying via e-transfer or debit can’t help boost your score.
Fees: Even if they do accept payment via credit cards, landlords and mortgage companies may charge a convenience fee, which can add up quickly. Third-party payment processors always charge a fee ranging from 2.5% and higher.
Interest rates: If you carry a balance on your credit card, you will be charged interest on the unpaid balance. Credit card interest rates (which average around 20% in Canada) are usually much higher than mortgage rates, so it can be expensive to carry a balance.
Debt: Using a credit card to pay your rent or mortgage can lead to debt if you can’t pay off your balance in full each month. This can lead to financial fallout if you are already struggling to make ends meet.
When does it make sense to pay a fee?
It really only makes sense to pay a fee to charge your rent or mortgage to a credit card if you’re going to come out ahead financially. For example, if you earn 3% back in rewards for any spending charged to your credit card, then it would be worth paying a 2.5% fee because you’re at least coming out ahead by .5%.
While fees are a key consideration when deciding if it’s worth it to pay your rent or mortgage with your credit card, another important thing to keep in mind is your ability to pay off your credit card balance each month. Mortgage and rent payments are large expenses and unless you’re certain you can pay what you owe in full you could end up paying 20% in interest on your unpaid balance. Interest charges can soon balloon out of control and you could find yourself owing considerably more than you would have if you had just made your rent of mortgage payment via cheque, debit or e-transfer.
It's important to consider whether the potential benefits of using a credit card to pay rent or mortgage payments outweigh the potential challenges that come with this payment method. Overall, if you're considering using a credit card to pay your mortgage, be sure to do your research and understand any fees involved, and make sure you're able to pay off the balance in full each month to avoid paying unnecessary interest charges.