Buzz
People might think about using a credit card to pay their mortgage for two main reasons: to rack up credit card rewards or because they're having difficulty keeping up with payments. However, whether or not you can actually do this depends on a variety of factors, such as your credit card issuer's and mortgage lender's policies, as well as the credit card network's terms. Even if you have the option, it’s crucial to weigh the risks and disadvantages.
Credit cards aren’t accepted for direct mortgage payments.
To start with, most mortgage lenders do not allow direct credit card payments for monthly dues. This is because credit card companies charge processing fees of around 3%, which makes it a costly option for lenders.
Third-party services like Plastiq let you pay your mortgage using a credit card, but they charge a convenience fee of around 2.5%-% of the payment total. This fee usually cancels out any rewards or points you might earn.
Another option is to take a cash advance from your credit card and use it for your mortgage. However, cash advances typically come with higher upfront fees and interest rates compared to regular purchases, making this a costly choice.
Credit cards often have higher interest rates than other payment methods.
If you can’t pay off your mortgage balance in full when your credit card statement is due, you'll face steep interest charges, which could easily offset any rewards or points you earned. Additionally, putting a large mortgage payment on your credit card could greatly increase your credit utilization ratio (the percentage of your available credit you’re using), which could harm your credit score.
If you're already struggling with your mortgage payments, charging it to a credit card could worsen the situation by piling on more debt and making it even harder to stay on top of your payments.
In certain circumstances, it can make sense to use a credit card to pay your mortgage.
Paying off your mortgage with a credit card might be reasonable in specific situations such as:
To earn a generous sign-up bonus or reward points by meeting the credit card's minimum spending requirement.
If you're facing a cash flow issue and need to settle your mortgage before your next paycheck.
To take advantage of a promotional 0% APR period by transferring mortgage payments to that lower interest rate using balance transfers or checks.
However, it's important that you have a strategy in place to repay the credit card balance quickly in order to avoid incurring high interest charges.
How to pay your mortgage with a credit card (and minimize fees involved).
If you're seeking ways to earn credit card rewards, paying your mortgage with one might seem like a compelling idea. Given that mortgage payments often represent a significant portion of a homeowner's recurring expenses, the chance to earn rewards or cash back on such a substantial amount could be highly beneficial. However, if you're set on using a credit card for your mortgage payments without incurring extra charges, there are several strategies worth exploring.
Opt for a credit card that offers a 0% introductory APR on purchases: Some credit cards offer a 0% introductory APR for purchases for a limited time, usually ranging from 12 to 18 months. If you're able to pay off your mortgage before the promotional period concludes, you could avoid paying interest altogether.
Consider using a third-party service: Services like Plastiq allow you to make mortgage payments with your credit card, though they charge a fee—typically around 2.5%. This might still be a better deal than the convenience fee charged by your lender.
Talk to your mortgage lender: Some lenders may be open to waiving or reducing the convenience fee for credit card payments, especially if you've had a positive payment history or have been a long-time customer.
The conclusion
The main risk is accumulating too much debt if you're unable to pay off your credit card balance in full each month. Since mortgage payments are significant and recurring, they can quickly lead to unmanageable debt if charged to a credit card for an extended period. Interest rates on credit card balances are typically much higher than mortgage rates, exacerbating the financial strain.
In general, it's advisable to avoid using a credit card for mortgage payments unless you have a clear, short-term plan and the ability to aggressively pay off the balance. Without such a strategy, the costs and risks are likely to outweigh any potential rewards or points for the majority of homeowners.
