With the major economic upheavals the year has already seen in the form of demonetisation, the upcoming U.S Budget reform and a surprising debt to GDP ratio from China, 2017 has got off to a rocky start, finance-wise. With the amount of turbulence seen in the markets, keeping a hold on one’s finances and being prudent with spending is something all of us should be looking at doing.
The biggest drain on one’s monthly income is usually rent or monthly EMI’s for those of us who have taken out loans. Being a fixed expenditure, there appeared to be little wriggle room when it comes to such payments.
However, a company called RedGiraffe claims to have found a way around this, through its new product that allows one to pay their rent through their credit card. RentPay, the company’s application, allows customers unbelievably low interest rates on such transactions.
Sounds almost too good to be true? We run the numbers for you and weigh the pros and cons of using such a service.
RentPay, the Credit Card Solution for Your Rent Woes:
In the case of paying rent through RentPay, the customer pays a part of the cost to use their credit card towards rent payments. The current rate offered by RentPay is 0.39%, with a 14% service tax payable on the amount.
While the service tax might seem like a bit of a dampener, the total amount you stand to pay is still quite low, as illustrated by the below example:
For a monthly payable rent of Rs.10,000, the amount payable through RentPay would be:
- Monthly rent – Rs.10,000
- Transaction charge – Rs.39 (0.39% of the amount)
- Service tax – Rs.5.46 (14% of Rs.39)
- Total amount payable – Rs.10,044.46
As seen above, the difference payable is a mere Rs.44 per month if the service is used.
How It Works:
RentPay has tied up with a few banks like HDFC, ICICI, IndusInd, Kotak Mahindra and Axis Bank. As of now, account holders of the above banks with credit cards can avail of their rent paying option. you can also apply credit card instantly through online.
Customers have to merely sign up and upload their rental agreement and initiate the payment.
The company has managed to keep transaction rates so low (at less than half a percent) due to their unique business model.
While the company is relatively new, the model it has devised is unique as it presents individuals with the chance to put their rent payments on a credit card, which effectively buys them a longer period of time to pay off the amount. This is done through the ‘free credit’ period that most credit cards offer.
In addition, using a credit card will help you as the user amass rewards points on a regular basis, if a standing instruction in favor of such a payment is generated.
Since the payment is made on time irrespective of whether you have the required funds in your account, the possibility of ticking off an irate landlord is greatly reduced.
While companies like RentPay and possible others that crop up seem to provide an easy way out of losing a significant chunk of your income each month, you have to keep certain ground rules in mind.
While the service provides a low interest rate on the amount, it still has to be paid off on time to avoid accruing additional charges.
Making your credit card payments on time is the key to enjoying the benefits of such a service, as the ‘free credit’ period is only extended in the event of the previous balance being fully cleared. Thus, if you have any outstanding balance on your credit card and initiate a payment through the service, you will be accruing interest on the payment from the day the payment is made.
While a service like RentPay offers a tempting solution to most young working professionals in the form of deferred rent payments, it is advisable for you as a prospective user to read the fine print and ensure you’re on track with your credit card bills to fully enjoy the benefits of such services.