When facing financial difficulties, using a credit card to pay your mortgage can provide a temporary solution and offer the flexibility to spread out payment over several months.
Additionally, paying your mortgage with a credit card can potentially earn you significant rewards or a generous welcome bonus that you wouldn’t typically receive through regular spending.
Can You Pay Your Mortgage With a Credit Card?
While it is technically possible to pay your mortgage with a credit card, it’s not a simple process. Several obstacles may arise as you attempt to make the payment. Firstly, the majority of mortgage lenders do not allow direct payment with a credit card, so you’ll have to find alternative payment methods.
Another issue you may face is that using workarounds to make your mortgage payment with a credit card may involve additional fees, which could negate any potential rewards you may receive. This expense may make using a credit card to pay your mortgage less appealing if you’re seeking rewards.
Despite the extra fees and steps involved, there are some situations where paying your mortgage with a credit card can make sense.
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Should You Pay Your Mortgage With A Credit Card?
Determining whether paying your mortgage with a credit card is worthwhile largely depends on the potential benefits you can gain. For many people, the complicated workarounds necessary to use a credit card for mortgage payments may not be worth it, unless there are non-mortgage-related advantages to consider.
Earn Rewards
One benefit of paying your mortgage with a credit card is earning rewards. It can make sense to do so when you’re aiming for a credit card welcome bonus that you wouldn’t otherwise be able to earn. For instance, suppose you’re interested in a credit card with a welcome bonus of 60,000 points, but you need to spend $4,000 in the first three months to qualify. If you don’t usually have enough expenses to put on a card, paying your mortgage with a credit card can help you reach the threshold, even if you need to pay processing fees.
Another scenario in which it may be advantageous to pay your mortgage with a credit card is if you can earn a higher rate of rewards than the processing fees you’ll incur. For example, if the processing fee is 2.5%, but your credit card offers a flat 3% cashback, you can use your credit card to pay your mortgage, pay off the credit card bill in full each month to avoid interest charges, and earn a net of 0.5% in rewards. That means for every $1,000 you pay towards your mortgage, you can earn $5 in rewards.
Consider Fees and Interest
If your goal is to spread out your monthly payment or get caught up on bills, using a credit card to pay your mortgage generally isn’t a wise decision. Typically, mortgage loans have lower, often fixed interest rates, while the average credit card interest rate is currently above 18%, and many credit cards have variable rates. Moving secured debt at a lower rate to an unsecured credit card with a higher interest rate could potentially lead to financial trouble. It’s best to avoid this slippery slope and explore other options to manage your monthly payments and bills.
Avoid Late Payments
To ensure you make the most of paying your mortgage with a credit card, it’s important to have enough funds in your bank account to pay your credit card bill in full every month. Otherwise, you risk accumulating interest charges, which can quickly negate the benefits of paying your mortgage with a credit card. Additionally, recurring late payments can jeopardize your ability to make mortgage payments and damage your credit score.
If you’re in a situation where you can’t make your mortgage payment by its due date, but you’ll be able to pay it off by your next credit card statement, you can charge your mortgage to a credit card to avoid late fees or penalties. However, this can be risky, especially if you’re already living paycheck-to-paycheck. If your paycheck is delayed, lost, or your employer files for bankruptcy, you may not be able to pay off your credit card bill in full, which can result in accumulating debt and interest charges. In such cases, it may be wiser to consider other borrowing options or find a way to make your mortgage payment on time.
Avoid Foreclosure
Mortgage
Although it’s possible to use a credit card to avoid foreclosure in a manner similar to the “avoiding late payments” approach mentioned earlier, we advise against this. Accumulating additional credit card debt on top of missed mortgage payments is unlikely to improve your circumstances or enable you to keep your home over time. Instead, explore other options for preventing foreclosure and concentrate on paying off your credit card balance to reduce your debt and hasten your improvement.
How To Pay Your Mortgage With a Credit Card?
Although it may require some effort, paying your mortgage with a credit card can be beneficial in certain situations. If you’re interested in doing so, you have two primary methods to choose from.
Convert Gift Cards Into Money Orders
One alternative to paying your mortgage directly with a credit card is to purchase pin-enabled Visa gift cards using your rewards credit card, and then use those gift cards to buy money orders. However, be aware that some credit cards exempt gift card or cash equivalent purchases from earning rewards in their terms and conditions. Additionally, some banks may consider gift cards to be a “cash equivalent” and not eligible for rewards.
It is also important to consider how you will use the money orders to pay your mortgage. If you can visit a brick and mortar branch of your mortgage bank, you can pay your mortgage payment with money orders directly. However, if you have to mail your money orders, there may be added steps and fees involved, and your mortgage payment could be late if the money order is lost in the mail.
It’s worth noting that using this method to earn rewards is unlikely, as credit card companies have become aware of these types of transactions and often exclude them from earning rewards. The primary benefit of this method is to use a credit card as a stop-gap measure for mortgage payments.
Use Plastiq.com
Plastiq.com is a third-party service that allows you to pay various bills using a credit card in exchange for a 2.9% fee. However, most flat-rate rewards are rare above 3%, making it a less effective way to earn rewards. Although you can use most credit cards with Plastiq.com to pay bills, only Discover and some types of Mastercards can be used specifically to pay your mortgage. If you have a different card issuer, your options may be limited.
While you could use Plastiq.com to earn the equivalent of 3% back on your mortgage payments, the rewards are quite small. It’s better to use Plastiq.com to earn a big welcome bonus temporarily. For instance, suppose you sign up for a card to receive a welcome bonus of 60,000 points after you spend $4,000 in the first three months. If you use Plastiq.com to pay your mortgage and funnel $4,000 onto this card, you’ll pay $116 in fees but earn 60,000 points, putting you ahead by $484.
Although the 2.9% fee adds up quickly, you can avoid paying fees by referring friends to Plastiq.com. Once you’ve signed up, you can share a referral code with others. When someone uses your code to sign up and makes a payment, you’ll earn “fee-free dollars,” which you can use to pay your bills without any fees.
