As the number of renters in Canada continues to climb – outpacing the rise in homeowners – credit card issuers and fintechs are targeting this growing segment of the population with new perks.
This fall, KOHO began offering 0.25-per-cent returns with its new rent cashback program through its online banking account, which offers features of a prepaid credit card and a debit card. Meanwhile, Canadian fintech Chexy has allowed users to pay rent through their existing credit cards and reap cashback rewards since 2023.
In terms of accessibility, KOHO and Chexy keep the process straightforward for landlords.
Chexy charges the user’s credit card and KOHO charges the user’s account to send the receiver (in this case, the landlord) an e-transfer, so nothing changes if that’s how they normally accept rent payments. They also allow users to pay through preauthorized debit.
But it’s important to consider whether the rewards of paying rent with credit justify the fees and how renters paying with e-transfers or cheques can truly benefit.
Money experts say the benefits can be substantial – and they go beyond financial savings alone. However, there are limitations on the rewards, and the fees aren’t insignificant so it’s vital to calculate how to offset these costs.
Chexy, for example, works by charging the user’s credit card and then paying the landlord, but it costs users 1.75 per cent. This means they need to be using a credit card with a cashback rate of at least 2 per cent to make it worthwhile, said Cheryl Pinto, a Toronto-based personal finance coach at Wealth Works Solutions.
Scotiabank’s Momentum Visa Infinite Card, for instance, offers 4 per cent on recurring bills. “With an average rent of $2,000, you can look at making $600 in cashback per year,” she said.
Card issuers like KOHO have additional fees to consider. Their cashback rent rewards are only available with their “Everything Plan,” which comes with a $19 monthly fee, and the purchase of their tenant insurance. That’s a steep $228 a year. In addition, KOHO caps cashback rewards at $3,000 in monthly rent payments.
Even a card like Scotiabank’s Momentum Visa linked with Chexy is capped once users reach $1,000 in cashback for the year. After that, the rate drops to 1 per cent.
Adrian Bar, a Toronto-based personal finance YouTuber who has invested in Chexy, said he’s personally mitigated these issues by using his primary card for most of the year and switching once he hits the cap. “I stop using Scotiabank, and then switch over to the Amex or another card at 3 per cent or 2 per cent for the rest of the year,” he said. “In January, the numbers reset and I’d go back.”
Mr. Bar said he’s able to save roughly $750 a year on his monthly rent payments of $2,200 by alternating between his Scotiabank Visa and Amex on Chexy.
But there are benefits to credit-card rent payments beyond cash rewards. Ryan Kurtz, a certified financial planner at Objective Financial Partners, said using a credit card to pay rent can ensure you never miss a payment.
“If you were to have to pay rent a couple of days prior to when you get paid from work and you didn’t have the money, you’ll pay it like credit,” he said. “You’ll get paid a couple days later and you can just pay off your balance.”
Of course, the risks with this arrangement are as big as the rewards. You’re easily adding your biggest expense to your credit card every month.
“You don’t want to be having to pay credit-card interest on your rent – that’s huge,” Mr. Kurtz said.
With any credit-card rewards, Ms. Pinto urges renters to assess the “break-even” point – ”how much you’d need to spend on the card annually to earn rewards that offset the fee.”
“If a card has a $100 annual fee and offers 2-per-cent cashback, you’d need to spend at least $5,000 annually to break even,” she said.
Editor’s note: A previous version of this story referred to KOHO’s online banking account as a credit card. This story has been updated to clarify that the bank account includes features of a prepaid credit card and a debit card.