The website WilliamPaid.com is in the business of facilitating monthly rent payments.
Here’s how it works. First, set up an account, linked to one or more credit or debit cards, or a checking or savings account. Next, designate a payee (your landlord). Then establish a payment schedule and amount. And lastly, press the “Go” button and the rent payments will be sent automatically to your landlord, on time, every month. No muss, no fuss.
The site promotes the service as a convenience and as a credit-building tool.
But for rewards-program participants, it also holds the promise of earning frequent flyer miles or hotel points by using credit cards to make those hefty monthly rent payments. (Landlords typically do not accept credit-card payments.)
Should you use a credit card to pay your rent? It all comes down to the costs, of course.
The Value Proposition
While the site promises to “Pay your rent for less than a cup of coffee,” that’s hardly the case when it comes to credit card payments.
The basic service costs $29.95 for 12 months. Which is, indeed, less than a cup of coffee every month. But that price is for payments made from checking or savings accounts. If you elect to pay with a credit card, there’s an additional fee of 2.45 percent of the amount charged to the card.
So if the rent is $1,500, the surcharge to pay with a credit card would be $36.75 per month, or $441.00 per year. Put another way, you would be paying 2.45 cents for every frequent flyer mile earned. That’s roughly double the value of the average mile, so you’ll be overpaying unless you make it a point to redeem those high-priced miles for higher-value awards.
What’s Wrong With This Picture
The problem here—as it is with the companies that charge a 2.35 percent convenience fee for middle-manning tax payments to the IRS by credit card—is the so-called merchant fee that businesses and organizations must pay in order to accept credit card payments.
Merchant fees average around 2 percent, which neither the IRS nor landlords are willing to forgo.
So companies facilitating credit card transactions between the IRS or landlords and consumers have no choice but to collect the merchant fee, plus a little extra to provide themselves a margin of profit.
Since that surcharge amounts to 2-plus cents on every dollar charged—more than most miles are worth—these services are doomed to deliver sub-par value for mileage-earners.
Reader Reality Check
Can you justify paying an extra 2.45 percent to earn miles for rent payments?
How much extra would you be willing to pay?
This article originally appeared on FrequentFlier.com.