You Can Pay Your Mortgage With a Credit Card (but You Probably Shouldn’t)
There are two main reasons why people consider paying off their mortgage with a credit card: either to earn credit card rewards or because they are struggling to afford their mortgage payments. But while it may seem like a convenient option, your ability to pay for your mortgage with a credit card depends on several factors, including the policies of your credit card issuer, your mortgage lender and the credit card network. And even if you can , it’s important to carefully consider the potential risks and downsides.
You cannot use a credit card directly
First things first: Most mortgage lenders do not directly accept credit cards as a method of paying your monthly mortgage payments. This is because the lender will have to pay a processing fee of around 3% to the card issuer, making it uneconomical.
Third-party bill payment providers like Plastiq allow you to pay your mortgage with a credit card, but they charge a convenience fee of about 2.5% to 3.5% of the total payment. This fee will likely negate any rewards or bonus points you might earn.
Another option is to get a cash advance from your credit card and use it to pay off your mortgage. However, cash advances typically come with an upfront fee and higher interest rates than traditional purchases, making it an expensive option.
The interest rate is likely higher on a credit card.
If you fail to pay off your mortgage in full by your credit card statement due date, you’ll be hit with high interest rates that can quickly wipe out any rewards or points you’ve earned. Not to mention, putting a large mortgage payment on your credit card can significantly increase your credit utilization ratio (the amount of credit you use compared to your overall credit limit), which can negatively impact your credit score.
If you’re struggling to afford your mortgage payments, putting it on a credit card can only make the problem worse by increasing your overall debt load and making it harder to keep up with payments.
When it makes sense
Paying your mortgage with a credit card may make sense in limited situations:
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To earn a huge sign-up bonus or its equivalent in points by meeting the card’s minimum spending requirements.
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If you are experiencing cash flow difficulties for one month and need to pay off your mortgage before your next payday
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Take advantage of the extended 0% APR period by converting your mortgage payments into this low interest rate through balance transfers or balance transfer checks.
However, in these cases, you should have a plan to pay off your credit card balance quickly to avoid costly interest charges.
How to Use a Credit Card to Pay Your Mortgage (Without Huge Fees)
For those looking to earn credit card rewards, paying off your mortgage with a credit card can be an attractive option. After all, mortgage payments are typically one of homeowners’ largest recurring expenses, and the opportunity to earn bonus points or cash back for such a significant payment can be lucrative. If you’re determined to pay off your mortgage with a credit card and want to avoid fees, there are a few potential strategies to consider:
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Use a credit card that offers a 0% introductory APR on purchases . Some credit cards offer a 0% intro APR on purchases for a limited time (usually 12-18 months). If you can pay off your mortgage payment before the end of the introductory period, you can avoid interest charges.
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Use a third-party service: As I mentioned above, there are third-party services, such as Plastiq , that allow you to pay your mortgage with a credit card for a fee. Although there is a fee for these services (usually around 2.5%), it may be lower than the convenience fee charged by your mortgage lender.
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Negotiate with your mortgage lender: Some mortgage lenders may be willing to waive or reduce fees for the convenience of credit card payments, especially if you have a good payment history or a long-standing relationship with the lender.
Bottom line
The biggest risk is going into excess debt if you can’t pay off your credit card bill in full each month. Mortgage payments are a large recurring expense that can turn into unmanageable debt if paid with a credit card over the long term. Interest charges on revolving credit card balances are also extremely high compared to interest rates on mortgages.
In general, avoid paying off your mortgage with a credit card unless you have a consistent short-term strategy and plan to actively pay off your card balance. Otherwise, the costs and risks typically outweigh any potential benefits or value in cents for most homeowners.