Each month, Jack Lamarre, a 24-year-old social media manager in San Francisco, pays his $2,600 rent using his credit card. As a TikToker incentivized by credit card rewards, he was eager to get something in exchange for paying his landlord on time. So he signed up for a new Wells Fargo credit card that encourages people to use their credit cards for rent, including a workaround to dodge the transaction fee that many landlords charge for credit card payments. Cardholders get points that they can use on travel, shopping, or future housing payments. Users must charge more than their rent to the card — they need to put at least five total transactions on it each month to get the points — so Lamarre also uses the card for coffee and some app subscriptions.
His interest rate is 28.74%, higher than average, but Lamarre called the decision to put rent on his card “a no-brainer” because he pays it off in full every month so he never accrues interest. It’s a significant risk to take — housing is typically a person’s largest expense, so if that balance rolls over month to month, the interest payments quickly snowball. But, Lamarre told me, “Among my friends, we generally follow the mantra of never paying interest, and always paying your credit card in full and on time.”
The oldest Gen Z adults are now 26 years old, and as they become more financially established and have more expenses, they are charging more to their cards, including large transactions such as housing, car payments, and student loans, according to a survey conducted by LendingTree in collaboration with BuzzFeed News.
While researchers have historically perceived young consumers to be averse to credit cards, and to prefer cash, debit, or buy now pay later options (which typically allow buyers to pay by installments without interest as long as they pay on time), America’s system of consumer debt is ultimately still highly reliant on credit cards. They remain the most prevalent form of debt in the US. Besides student loans, they are also the easiest way for young people to build a credit history, which allows them to eventually qualify for other kinds of loans. (Credit bureaus are still working out how to incorporate buy now pay later data into people’s credit scores.)
As this shift takes hold, new credit cards are specifically targeting Gen Z adults. Lamarre pays his rent using the Bilt card, which was launched last March. A Bilt representative told BuzzFeed News the credit card’s target demographic is renters ages 21 to 35, and most of its users are Gen Z and millennials, with a median age of 29. Bilt processes over $5 billion in rent annually, and cardholders can use a feature that automatically pays the rental charges from an associated bank account so that rent doesn’t contribute to the statement balance and they can still access their full line of credit. As of publication, the card had interest rates ranging from 20.74% to 28.74%, and it “primarily” made money from fees billed to merchants for each transaction. Bilt declined to share revenue data or the total number of cardholders.
His interest rate is 28.74%, higher than average, but Lamarre called the decision to put rent on his card “a no-brainer” because he pays it off in full every month so he never accrues interest.
Other payment processors, such as Plastiq, also allow consumers to charge expenses to their credit cards — even when it’s not an accepted form of payment by the vendor — so they can earn points on their monthly rent, mortgage, student loan, and car payments. It's not always worth it, as these companies might charge a fee that is a percentage of the transaction for this service. Jacob Channel, a senior economist at LendingTree, said people can also use their credit cards to buy prepaid debit cards in order to earn points for making debt payments.
Some people have a stable income and are diligent about making credit card payments on time, making it easier to game the points system. But Channel said if you lose your job or suddenly cannot make a payment, “worst case scenario, you get charged interest and fees on that monthly payment on top of what you already have to spend” by using these services. The interest rate on credit cards is usually significantly higher than on other loans. Ultimately, he said, he “wouldn’t recommend it.”
Erin Confortini, a 23-year-old auditor in Pittsburgh who charges her rent and dining-out expenses to her Bilt card, said she only does this because she can autopay the balance in full each month. “I’m not saying that this is a good strategy for everyone. We all know a lot of people are in credit card debt,” she said.
Both Confortini and Lamarre post about personal finance topics on TikTok (surveys show that most Gen Z consumers turn to social media platforms like TikTok and Instagram for financial advice) and both have talked about paying rent on their credit card on the platform. Neither of them works with Bilt, although they can earn points for successful referrals. Confortini estimates she has made about 35 referrals over the last year.
Daniel Heppner, a 25-year-old software developer in Seattle, also charges his $1,700 monthly rent to his Bilt card and satisfied the minimum transaction requirement by buying multiple $1 Amazon gift cards (those purchases started to get denied, so he now uses the card at restaurants and cafes). “I honestly, overall, feel like credit card rewards are just a big scam,” he said. “We're all paying for it with credit card fees. But I'm going to take advantage of getting as many as I can as long as this is the system that we live in.” Heppner said he has about 10 credit cards and pays them off in full. “I don’t even know how worth it it is to try to maximize all of it. What are you getting, an extra $10, $20, $30 bucks a month?” The fact that rewards are funded in part by interest from people who cannot pay their bills is “really inequitable,” he said, but the way commerce works today, credit cards are “not something that I can boycott.”
For consumers who are not trying to earn rewards or cannot pay their balances off in full, charging these expenses to a credit card can indicate a financial shortfall, “and that’s certainly going on with Gen Z as well,” said Matt Schulz, chief credit analyst at LendingTree. “It’s a scary thing, especially when you consider how quickly interest rates have risen over the last year or so.” The average credit card interest rate is now 23.55%, the highest since Schulz’s company began tracking monthly rates in 2019. In the first year of the COVID-19 pandemic, there was a sharp increase in renters who were charging rent to their credit cards as they awaited emergency relief funds, according to the Federal Reserve Bank of Philadelphia. In a separate LendingTree survey, about 45% of Gen Z adults live paycheck to paycheck and 62% of people who did not have money to pay their bills have used their credit cards to cover them.
“I’m not saying that this is a good strategy for everyone. We all know a lot of people are in credit card debt.”
“I would never put rent on my credit card,” said Em, a 26-year-old in Boston who is trying to pay off credit card debt she’s had for about a year and asked not to be identified by her full name. “I’m not sure I’d feel comfortable — or to be honest, trust myself — to try this tactic.” She lives paycheck to paycheck and worries she would forget to pay her card one month or fail to put aside that portion of her paychecks if her rent went onto a credit card. “It seems like a rabbit hole just waiting for me to fall into,” Em said.
“Credit card companies make money on people who don’t pay their bills on time,” Lamarre said. “People who are responsible with credit cards, like me and my friends, at least get to be rewarded by using the cards responsibly. … It’s not something I control, that people aren’t responsible with it, but I try to tell people how to work within the system and not be a victim to it.”
The average credit card balance among Gen Z consumers last year was $2,854, according to Experian. LendingTree’s Channel expects Gen Z consumers’ credit card use will increase as they age, as millennial consumers’ did. Many are still not completely financially independent. When the pause on student loan payments is lifted, and more Gen Z adults age out of restrictions that make it harder for people under age 21 to get a credit card, their reliance on this form of debt will likely rise.
As credit card companies develop new incentives, Channel encouraged caution. “I definitely would not advocate Gen Z, or really anyone else, to go out and say, ‘Gee whiz, I’ve got to start making my car payment with my credit card now, because I’ll get more points,’” Channel said. “It’ll probably not work out very well for most people.” ●