Should you pay rent by credit card or BNPL loan?

Talk about a triple whammy. The economy got hit by the Covid-19 related shutdowns. Then in 2022 the war started in Ukraine, having a ripple effect throughout the globe oil prices and grain shortages. The last nail in the figurative coffin seems to be the inflation. Food prices have jumped at least 20%. Inflation is at a level not seen in decades. What’s a renter to do? Pay rent or buy food or gas to get to work. A question comes up – should the renter pay rent by credit card or a BNPL loan? The answer is actually very clear.

Unless there is absolutely no other option – the answer is a categorical no. Here are some of the reasons that are commonly shared, and our counter-argument

Credit as convenience

Credit can be a convenience, especially if the landlord is absorbing the charges for paying by credit cards or BNPL loans. This is a common argument from tenants. Deferring payments is a way to gain “points” or “rewards”. The challenge with this is that a single month of missed payment (even if inadvertent) nullify possible benefits from using the credit card. For instance the single month credit card interest on an 18% annual interest rate for a credit card balance of $2000 is $30. What’s more, the missed payment can affect the credit score. In effect, the negative impact exceeds the potential lift to the credit score by paying through Dwello.

BNPL as a “safe” option

BNPL is a sleight of hand. As Prof Scott Galloway pointed out, many BNPL brands are marketed to the younger generations as an option to credit (despite being a form of credit itself). This is a myth. Not only is BNPL a form of credit, the renter can be hit with a heavy late fee – as much as 25% – if they are late on the installments.

“By most measures, BNPL services aren’t even good credit offerings. With a traditional credit card, you pay nothing up front, then you’ve got, on average, five weeks to pay without incurring any fees or interest. Closer to two months if you manage your billing cycles carefully. Carrying a balance will cost you, though, 1%-2% in interest per month. Miss a payment, and you get a late fee, about $30 — on which you’ll also pay interest.” – Scott Galloway

The no-credit option

The obvious best option is to not use any loan product on paying rent first of all. We cover money saving tips here , here and here. But if you have to use a credit card, Dwello will accommodate that. Landlord or tenant, contact us to discuss your requirements. Use the form below.