Cash-strapped Americans are using credit cards to pay rent. Do this instead

Ethan Rotberg
Cash-strapped Americans are using credit cards to pay rent. Do this instead
Cash-strapped Americans are using credit cards to pay rent. Do this instead

As the pandemic continues to drain America’s bank accounts, an alarming number of people are turning to plastic just to keep a roof overhead.

This year has seen a 70% surge in people paying their rent with credit cards, according to an analysis by the Federal Reserve Bank of Philadelphia, as reported by NPR.

Considering the high interest rates on most credit cards, out-of-work tenants are digging themselves a deep debt hole. And, government protections run out soon: A nationwide eviction moratorium expires at the end of the year, and a moratorium on foreclosures will be over at the end of January.

While you might be tempted to delay your own rent or mortgage payments with the help of a credit card, there are easier and cheaper options to help you get through the coming months.

The perils of plastic

Businessman using payment terminal
Africa Studio / Shutterstock

Why is it bad to pay your mortgage or rent with a credit card?

Well, first of all, most mortgage lenders won’t let you do it. They frown on paying down debt with debt, and so do some credit card issuers. Many landlords won’t accept credit cards, either.

Some third-party companies can act as a go-between, but those services aren’t free. Plastiq, for instance, will charge an additional 2.85% processing fee.

That’s on top of the high interest your credit card will charge you if you can’t pay those bills at the end of the month. Credit card purchases typically have an APR of 12% to 20%.

Whether you’re a homeowner or a renter, you’ll want to try these four strategies before you max out your cards.

1. Slash your expenses

Young couple calculating their domestic bills at home stock photo
Tijana Simic / Shutterstock

If you’re considering using a credit card to pay your rent or mortgage, you’re probably running on a very tight budget already. But you might be able to find savings where you haven’t thought to look.

Spending a lot less time on the road this year? Your car insurance company might give you a lower rate. If it won’t give you a break, shop around for a better option; by using a free quote comparison site, you could potentially save as much as $1,000 per year.

You can apply those same comparison shopping skills to save a ton of cash on your homeowners insurance, too.

And if you can’t rein in your holiday spirit, be sure to use a free browser extension to scan for better prices whenever you buy gifts online.

2. Consolidate your debt

Calm african american business man take break at workplace
fizkes / Shutterstock

Piling large amounts of debt on a credit card is a risky plan, especially if you’re already carrying a hefty balance. Anyone having trouble making their minimum payments should consider debt consolidation.

So long as your credit score is in decent shape, you should be able to take out a personal loan with a much lower interest rate than your current credit cards. You’ll use that new loan to pay off your old debts, leaving you with just one bill to worry about.

A free quote comparison website will allow you to quickly compare multiple lenders, making it easy to find the best rate. The less you spend on interest, the faster you can free yourself from debt.

3. Increase your income

closeup of a young man in an office holding a briefcase and a surgical mask in his hand
nito / Shutterstock

Does it feel like you’re always playing catch-up, no matter how much money you save? You might need to pad your income to get ahead.

Plenty of companies are still hiring, even during the pandemic, but you might need to open yourself up to new roles you haven’t considered. Some advanced job boards will use AI technology to match you to interesting and lucrative positions based on your skill set and experience.

If that doesn’t work, consider picking up a side gig to convert any extra time into cash. Digital marketplaces will match your skills — it could be writing, drawing, even voice acting — with eager buyers all over the country.

4. Refinance your loans

Happy family in courtyard near their house
Africa Studio / Shutterstock

Interest rates have fallen through the floor over the past few months. That’s great news for homeowners, because you can take advantage of today’s dirt-cheap rates to cut your monthly mortgage bill.

More than 19 million mortgage holders could still refinance and save an average of $308 per month, according to the mortgage technology and data provider Black Knight.

Renters with a student loan can also take advantage of rock-bottom rates. You might be able to save thousands over the life of your loan, just by refinancing when the time is right.

Using a free comparison service online, the process is as simple as filling out a short survey and finding the cheapest rate.

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