Alex Deguzman and his wife, Trisha, are set to enjoy business-class flights to Japan later this year, thanks to a strategic use of their credit card rewards. Alex pays their $1,950 rent for their Columbus, Ohio apartment using his American Express Platinum card, which incurs a flat fee of $30 when processed through the building’s online platform. Despite the fee, which amounts to approximately 1.5% of the rent, Alex finds it worthwhile because of the substantial benefits he receives from the card.
“It’s a fee we don’t mind paying,” explained Deguzman, who actively seeks to use his credit card for most expenses. By converting his accumulated points into airline miles during a promotional period with a partner airline, Alex managed to amass around 130,000 points over the course of a year, ultimately covering the cost of their tickets to Japan.
Paying bills like rent with credit cards has become increasingly popular among consumers looking to capitalize on rewards programs. Beyond rent, expenses such as tuition fees, taxes, and other significant bills are also eligible for earning points or cash back. This trend reflects a broader shift away from traditional paper checks, with more landlords and service providers embracing digital payment options that include credit cards.
However, the allure of credit card rewards must be balanced against the transaction fees involved. Typically, payments for rent or tuition can incur fees ranging up to 3.5%, which often exceed the rewards earned with standard 2% cash-back cards or most travel rewards cards. According to Brian Kelly, founder of The Points Guy, paying more in fees than what you gain in rewards seldom makes financial sense.
Exceptions exist, such as the credit card offered by Bilt Technologies in partnership with Wells Fargo, which rewards users for paying rent while waiving transaction fees. This particular offering has garnered a loyal following among savvy cardholders, even though it reportedly costs Wells Fargo millions of dollars each month in subsidies.
For many consumers, sign-up bonuses and additional perks offered by certain credit cards can justify paying transaction fees. Platforms like Zillow, ClickPay, and RentCafe allow renters to pay via credit card with fees typically around 3%. Plastiq, another service, facilitates credit card payments to vendors who don’t accept cards directly, albeit for a fee of 2.9%, making it viable even for mortgage payments.
Sara Rathner, a credit card expert at NerdWallet, cautions that it’s challenging to find rewards that fully offset a 3% fee. While cash-back cards generally offer 2% returns and travel cards earn one point per dollar spent, the value of each point often hovers around one cent, though it can be higher depending on the specific rewards program.
Beyond the immediate rewards, many credit cards feature valuable benefits like travel insurance, airport lounge access, and purchase protections, which can outweigh the cost of transaction fees for some users. Brian Riley, director of credit-advisory services at Javelin Strategy & Research, capitalized on such benefits by using his credit card to pay auto and home insurance bills, enabling him to earn enough Delta SkyMiles for a trip from Tampa to Montreal.
Both Riley and Deguzman emphasize the importance of paying off credit card balances promptly to avoid interest charges, which can quickly negate any rewards earned. Accumulating debt at credit card interest rates, currently around 22% according to Federal Reserve data, can erode the value of rewards and lead to financial strain.
In conclusion, while paying bills with credit cards to earn rewards can be lucrative under the right circumstances, it requires careful calculation and financial discipline. By evaluating the fees and rewards against their financial goals, consumers can make informed decisions to maximize the benefits of their credit card usage without falling into debt.