Talk about a bad idea. Paying for goods and services with credit is one thing, but paying your rent with credit is a whole new can of worms. A Vancouver-based company says it has signed up more than 5,000 Canadians to directly pay their rent or condominium fees with a credit card since launching almost two years ago.
A new program called RentMoola may be the beginning of a trend that sees more charges migrating to credit cards, says Patrick Postrehovsky, co-founder and chief executive of the company.
“It’s a two-step approach, first we get the property managers signed up, and then we work with property managers to tell [tenants] about the service,” he says, adding his company is focusing on rent for now.
RentMoola says 15,000 rental units pay through its monthly service, 12,000 in Canada. The service allows consumers to pay via a debit card or a credit card and earn rewards for travel and merchandise along with exclusive discounts with certain retailers. About 40 per cent of customers opt to put their rent on their credit card.
Here is how it works. The company allows consumers to pay through debit for free, although it has charged $2 per transaction in the past. The credit card fee is 2.75 per cent of the transaction to the consumer, making the lure of gaining points on your card a less attractive option.
“Somebody has to pay for the cost of acceptance [of the credit card],” says Postrehovsky. “We are giving the consumer the option to pay [through a credit card].”
Millennials, which the company describes as 25 to 35 years of age, make up about 60 to 70 per cent of the RentMoola client base, as many consumers in that age range are unaccustomed to or uninterested in having cheques, the traditional form of paying rent.
Postrehovsky says the idea of charging more to credit cards has taken hold in some segments of society and the credit card companies have embraced the concept in the United States. Yeah, no kidding credit card companies have embraced the idea. It’s just another way to collect interest on consumers.
“Visa and MasterCard are aggressively going after what they call the emerging segments. Rents is one, college tuition and taxes are all [included],” he says.
Canadians are already deep in debt with a debt to income ration holding at 163%. What do you think will happen when we can add to our credit card debt? You’re basically inviting more debt. A bigger problem is created, one that can jeopardize the roof over your head.
Postrehovsky says you can put as much rent on your credit card as your credit limit will allow, but maintains his service is “not about getting people into debt” and clients have been told to be responsible. Isn’t that what most credit card companies say to consumers when they offer credit?
Ultimately it comes down to the consumer to be responsible with personal finance. With some many consumers spending beyond their means and seeking debt help, why would anyone think paying rent on credit would be a good idea? We certainly don’t.
For more articles on personal finance and debt relief / repair, please visit our blog, www.occa.ca/blog.
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