TL;DR - If you use the new Arrival Premier to pay rent,
you might come out roughly $120 ahead each year even after deducting all fees. EDIT: You might come out $120 ahead if your landlord charges a modest fee. A very high fee might even put you a few dollars in the hole.
I have been thinking that the new Arrival Premier might be a good card for those who would like to pay rent with a credit card instead of dusting off the trusty old checkbook every month. (Afterall, the trusty old checkbook does not give you 2%-3% cash back like the Arrival Premier can). I raised this issue on another thread, but I wanted to discuss rent specifically - hence the new post. I have sat down and crunched some numbers. For my calculations, I made the following 5 assumptions.
1. You have already looked at your larger financial picture/career/lifestyle/local economy and have decided that you are better off renting than buying a home for now. (This would likely apply to people who move every couple of years, live in areas where housing prices and/or property taxes and HOA fees are exhorbitantly high, and urban dwellers who want to work, live, and play downtown. If you really hate mowing the lawn and fixing hot water heaters, perhaps you might put yourself in this category as well).
2. Your annual rent is at or just below $15,000. (Sorry New Yorkers and Californians - perhaps you can hit the 25K benchmark).
3. Your landlord charges a convenience fee of $15/month to pay with a credit card.
(This is typical for a small apartment in my area). EDIT: $25-35 has become more common in my area now. Typically, the fee is roughly %2.7 percent.
4. You are currently paying rent with cash/check/debit card and are receiving no cash back and incurring no fees.
5. You will put all (or almost all) other spending on another card.
I then examined typical rents and fees in my area. Most renters in my area will pay somewhere between $12,000 to $16,000 per year in rent for a 1 or 2 bedroom apartment. This is more or less the sweet spot for using this card for rent from what I can tell. So, if you put exactly $15,000 on the Arrival Premier for yearly rent, you will receive 45,000 points (30,000 base points, plus 15,000 bonus points). This would give you a gross of $450 back as a travel credit.
Now, we must deduct the annual fee of $150. You will now have a net of $300 travel credit.
Now, let us deduct $180 (assuming a 15 monthly convenience fee X 12 months). This leaves you with a gain of $120/year. EDIT: We might need to deduct more, depending on current fees.
So, now as a renter, you must decide if the ~$120/year bonus is worth a Hard Pull on your credit. If Barclays allowed Plus holders to upgrade without a Hard Pull, (and perhaps even retain that 5% redemption) this new card might be very attractive for those in the situations described above. The Arrival Premier is just about the only credit card that is good for paying rent (assuming that you hit the $15,000 benchmark). With almost all other credit cards (I have ran the calculations on a few competing credit cards) you will lose money if your landlord charges a convenience fee.
Hey, Barclays are you listening? I have a secret to tell you...
You have a real opportunity to make your new Arrival Premier credit card VERY attractive for renters. Might you consider adding a perk or two in order to really hit this baseball out of the park? Seriously, all it would take is no Hard Pull for current customers, bring back the 5% redemption bonus, maybe add a domestic airline transfer partner or two. Perhaps let us transfer miles between cards? Trust me, the Arrival Premier credit card is (holding thumb and finger about half an inch apart) THIS CLOSE to being an absolute grand slam for renters. You have a niche market of young urban professionals here that you can really capture if you want to do so.
Do you want to sell 100 Widgets at $100 profit each or do you want to sell 1,000,000 Widgets at $10 profit each?
Clearing $120/year certainly is nothing to sneeze at! Not a bad deal if you can swing it.
A couple thoughts:
1. The lynchpin here is the flat fee for paying with a credit card. I rent and my landlord takes credit card, but assesses a 3% fee for the privilege. That blows the deal up for me and all those similarly situated.
2. In your example, a $15 flat fee to pay $1250 in monthly rent works out to a 1.2% effective fee. CC processing fees almost certainly have to be more than that, given that there are no annual fee 2% cash back cards out there. Point being, landlords charging an effective 1.2% cc fee are probably few and far between, as they are likely eating some of the transaction costs.
3. You can get the same $120 per year profit under your specified conditions with a no annual fee 2% cash back card. This is actually more valuable than the same value of Arrival Miles since cash can obviously be spent (or invested) in any manner (vs being limited to travel redemptions) and there's no $100 redemption threshold with cash. Granted, a no AF card is not likely to have a lot of the other card benefits of an Annual Fee card, but I think most consumers in the travel rewards market will demand a premium in the rewards earning rate in exchange for paying an annual fee.
I am currently renting as well. I think that our fee is something like two and a half percent. Thus, I can probably swing $120.
I am still on the fence about upgrading. If I do, it will only be for the purpose of paying rent plus a few other purchases to make it an even $15,000.
I will put my other expenses on another card. I'm planning on taking a couple of big trips in the next couple of years so I will probably first apply for a certain premium travel card that gets 3% cash back on travel and provides a $300 rebate for travel expenses. It also has a nice sign up bonus which is good because I'm also planning on purchasing some appliances soon.
Unless I am missing something, if you pay 15k in rent with a 2.5% CC fee, you are looking at $375 in fees on the year for paying rent with a credit card.
Add the annual fee for the premier card and your total annual costs are $525. You would earn a total of $450 worth of arrival miles for the annual spend of 15k, resulting in a net loss of $75 after all is said and done. Not a recipe for success.
I do think it would be cool if a cc issuing bank would work a deal to make paying rent (or a mortgage) with a rewards cc a winning proposition for the card holder. For example, an issuing bank could cut a deal with a rent payment company like Plastiq. Maybe they can somehow reduce the fee rates and "make it up on volume."
I think your calculations might be closer to accurate than mine for most people. It is really too bad that there is no good way to pay rent with a credit card and benefit the card holder.
I agree with your idea of making it up on volume. The first bank or credit card company that can crank out a credit card that is truly a winner for paying rent will find their card in high demand. There is a market for that and many renters might be willing to take a hard pull on their credit if they knew they would benefit in the long run.
Tangent off the rent subject, & I know you guys are way ahead of me on this subject, but might be helpful to some. Until last year, I was making most of my utility payments by check and mail method. Finally the bulb lit, and I set up all my utilities: Gas, Electric,Water, Garbage, Cable Internet, & DirecTV etc. to autopay each month to the Arrival Card. Also have the card set up in online portal for all insurance payments to State Farm for cars/house, etc. All at no extra charge and tons less hassle. Nets quite a few points.
Yes, I put all of my recurring bills on the arrival Plus. Those points really do add up.
Well, my landlord (actually a major corporation) is going to start allowing us to pay our rent with either a debit card or a credit card through a new system. We can still pay with check if we want. Here is the cost breakdown:
Credit Card (appears to be a 2.7% fee based simply on my rent figures, YMMV).
Debit Card (appears to be a 0.5% fee based simply on my rent figures, YMMV).
Check (no fee).
I am still thinking about trying to automate my bill paying by putting my rent on a credit card if I can find one with rewards that justify it. For most travel rewards credit cards I would take a loss, but there are about 2-3 cards for which it would be such a small loss that it might be worth the convenience - especially if I can transfer points from one card to another.
The 2.7% convenience fee is an annoyance, but if I can get somewhere around 2.25% to 2.5% travel cash back, I might take that small hit for the convenience of not having to write a check every month and then march it to the office during business hours - especially when I am out traveling.
Better option is automated ACH pull from your checking account. No fee and no effort after it's set up. So definitely check into that with your landlord to see if that is going to become an option.
That's great! Sadly for me there are cc fees associated with my utilities which are pricier than the cc rewards that I would earn.