Gone are the days when cash was the only way to make rent payments. In the era of cashless transactions, credit cards have become favoured options for making such monthly payments. Rent payments are a big component of your monthly budget and, frankly, an expense you can’t delay. Credit cards bring you the benefit of paying your rent on time without compromising on liquidity.
However, if you’re a BoB card user, paying your rent using your credit card will attract a processing charge. Here’s everything you have to know about this new mandate.
BoB Charges on House Rent
Starting from 1st February 2023, all rent transactions made using BoB credit cards will attract a base fee. As per the bank circular, Bank of Baroda will impose a base fee of 1% on all such transactions. This is essentially a convenience fee charged. Apart from this base deduction, BoB will also impose GST at government-recommended rates on all fees, interest, and charges.
If you’re wondering what this means, here’s a quick example to help you catch up. Let’s say you pay a monthly rent of ₹20,000 using your Bank of Baroda credit card. With the 1% platform fee mandate in place, you will have to pay a fee of ₹200 on the amount.
A Little About Base Fees on Rent and Its Impact
In October 2022, ICICI became the first bank to introduce base fees on rent transactions using credit cards. SBI, too, has introduced a charge of ₹99+GST on all rent payments made via its credit cards. Similarly, you will also notice a charge of ₹250 on IDFC credit card payments while making rent transactions.
This step will significantly affect renters who use payment platforms like Paytm, Cred, and others to make rent payments via credit cards. These platforms also charge a platform fee for such transactions. However, since the merchant in the transaction is your landlord, you will have to cover this add-on platform charge. So, with the introduction of BoB’s 1% processing fee on rent payments, you will have to pay both this platform charge and the bank’s processing fee on the transaction.
While banks haven’t justified their base fee clause, its introduction is logically a step to curb credit rotation. With cardholders transferring sums to their friends and family under the ‘rent’ tag, rent frauds have been rising. Similarly, since rent transactions are usually sizable, they also attract more reward points. Accumulated rent transactions can also help customers reach milestone benefits and avail of renewal fee waivers. To check these fraudulent transactions, banks are introducing the base charge feature.
Should You Pay Your Rent Using a Credit Card?
With the new 1% processing fee mandate in place, your BoB credit card payments will be affected. So, you must wonder if using a credit card for rent payments is indeed prudent. To help solve this dilemma, here’s a list of pros and cons you can review:
Pros of Using a Credit Card for Rent Payments
- You can score reward points on your BoB credit card that can be redeemed in exchange for flight and hotel bookings, merchandise, etc.
- If you make your BoB credit card payments on time, you can significantly boost your credit score. This will help you secure a loan with lower interest rates and easy terms in the future.
- With the auto-pay feature of rent-paying platforms like Paytm, you can make timely payments and avoid missed rent due dates.
- Digital payment proofs for your monthly rent payments make it easy to track your rent expenses and manage your pay slips.
- If you’re going through a cash crunch, you can still easily meet your rent liabilities.
Cons of Using a Credit Card for Rent Payments
- Failing to make BoB credit card payments on time will lead to debt accumulation and a lowering of your credit score.
- Since rent is a significant component of your monthly expenses, using your BoB credit card to pay it can affect your credit utilisation ratio.
- If your credit utilisation ratio is over 30% of your approved credit limit, your credit score will plummet.
- Rental payment platforms like Paytm or Magicbricks impose an extra processing charge on rent payments via credit cards.
- While BoB cards come with up to 50 days of interest-free periods, you will still have to pay interest at 3.25%-3.49% on missed payments.
The Bottom Line
So, as long as you pay your BoB credit card bills on time and refrain from disturbing your credit utilisation ratio, you should be good. You can make BoB credit card payments on time, you can set up an auto-pay standing instruction, or pay using any one of the following ways:
- Via NEFT (National Electronics Fund Transfer).
- Via RTGS (Real-Time Gross Settlement).
- Via BoB’s Insta Pay portal.
- Via the BoB Billdesk.
- Via the BoB Self-Service portal.
BoB credit card payments can also be made offline by depositing cash or cheque at the nearest BoB branch.