A house is probably one of the biggest expenses we take on in our lifetime. Whether it’s your own house or a property that is rented, a home-loan EMI or house rent forms a substantial chunk of budget for monthly expenses.
In the last decade India, a country known for its joint family culture, has seen a swift change in this pattern. Nuclear family set-ups have become a preference and owning one’s own home is a financial goal.
As per the survey conducted by the India Mortgage Guarantee Company (IMGC), in January 2017, currently:
- Nearly 38% of the population is still living with their parents;
- 32%live in self-purchased homes, and
- Around 30% live in a rented home.
There is a rising incidence of rentals across different types of towns among young consumers. And rent surely marks as a considerable amount of one’s salary, especially for people living in metro and tier-I cities.
Mehul & Tanya, a young couple, have been living in a
rented apartment in Mumbai for the last 5 years. Both of them work hard to survive in this maximum city, as well as care for Mehul’s parents living in Nashik, who are ailing and dependent on him. Some months, paying the rent to their landlord is difficult and they face the embarrassment.
But people like Mehul, can now smartly pay their rent using a
credit card during moment of truth and enjoy some benefits…
Cash-back offers!
Reward Points!
Discounts!
Credit cards, as we all know, is plastic money which allows us to buy goods and services without having to immediately pay for them at the time of purchase. But now these purchases are not restricted to buying only goods and services. Now, you can earn the same benefits while paying your monthly rent. Yes, you heard it right!
Some of the private companies such as RedGiraffe, Paydeck, Paymatrix, etc. facilitate paying rent on your residential/ corporate property with the help of credit cards.
To avail this facility, you need to first register yourself and your tenant on any of such portals. You will be required to upload your rent agreement and other documents.Once your registration is complete your rent payments will be credited to your landlord’s account at the stipulated date every month.
Highlighted below are the 7 benefits of paying rent through a credit card:
- Free Credit period
One of the benefits which credit card companies provide is a free credit period, which means, if you make payments before the payment cycle ends, there won’t be any interest charged on the amount due. However, if you fail to honour payments within the due time, you are likely to pay interest, which is usually as high as 36% p.a., i.e. 3% on the outstanding amount due each month.
Hence, if you pay your monthly rent via credit card, you earn this free credit period. Usually all credit cards carry a credit circle of 45-50 days on the payment cycle. But make sure that you re-pay all your dues on or before the due date and don’t fall into a debt trap.
- Helps in managing cashflow better
A credit period can come to your rescue and aid in managing your cash flows, especially at the time of emergency or a critical juncture.
- Keep earning on savings
During this credit period, you can earn interest on the money in your savings account. You can earn somewhere around 4%-6% in interest every month which otherwise you would have defrayed as towards rent immediately.
- Reward points
Some cards offer reward points or incentives on making purchases on the card that can be redeemed or used at a later date. Find out if such reward points can be of any advantage to you. For instance, some credit cards allow you to redeem reward points at listed apparel stores and/or specific shopping centres.
Similarly, while paying your rent through credit cards will help you earn more reward points whenever the monthly outgo for rent is high. Hence, you can consider credit card offers that give you similar benefits and facilitate savings.
But, beware of irrelevant benefits the credit card companies offer. Many a times, they offer various benefits on the credit cards which might sound alluring, yet may not be useful to you. PersonalFN advocates ignoring these peripheral benefits and assess the core offering on the credit card. If the card has features that suit you, opt for it even if there are no extra benefits or frills attached to it.
- Cash-back facility
Another benefit that many online payment services, including credit card companies, offer is cash-back facility. These institutes offer attractive cash-back offers on every rupee you spend.
Many of us work hard to fulfil the dream of buying our dream home. But very often, the rise in cost of living, along with steep interest rates and high property prices deter us from taking a decision. These days some banks/ credit card institutions offer cash-back facility, whereby a fixed sum or a percentage of the rent you pay, will be returned back to you. This is credited to your account and can be used for any future purchase.
- Increase your credit score and visibility
Often, the loan application of younger applicants is rejected, as they do not have sufficient credit history. Credit rating companies such as CIBIL give a higher weightage to credit history. Your credit report gives you and your lender a clear picture about your credit history, credit behaviour, and credit worthiness. Borrowers who have a credit history of less than 6 months find it difficult to justify this while applying for loan.
A good score deems you a reliable borrower and this can help when negotiating terms of a loan, which eventually saves you interest and other costs.
- Other discounts
Last but not the least, it can also help you earn discounts and various offers issued by banks from time to time.
To Sum-up…
Paying rent through credit cards, surely offers a whole lot of benefits, but …
- Choose not to use credit cards available for every small purchase
- Keep one credit card separate exclusively for emergency
- Never pay credit dues using another credit card, or you will fall into a deadly debt trap
- Be in full control of your personal finances. While you hope for the best, plan for even the rainy days
Don’t get bogged down by the weight of monthly expenditure, just like Mehul & Tanya. Instead
use these facilities to your advantage, but deftly and keep taking each step to achieve financial nirvana.
Discipline is the utmost important thing to achieve financial freedom. And to maintain it, you need to be prudent and wise to make the best of the facilities available and not be swayed.
Happy planning!
☺
Add Comments