Service Fees & Other Charges
Since most lenders dont accept credit, youll likely have to use a third-party payment processor just to use your card. This convenience comes at a fee, which is usually a percentage of your mortgage payment. Always factor this into your cost-benefit analysis sometimes, the service fee is simply too high to justify using a credit card.
Obstacles To Paying A Mortgage With A Credit Card
It seems that the stars have to align so that you can make a mortgage payment with your credit card. Your card network, your card issuer and your mortgage lender all have to give the green light for a mortgage payment to go through successfully. Each party has its own rules.
For example, Visa allows mortgage lenders to accept Visa debit and prepaid card payments Mastercard allows the use of debit and credit cards for mortgage payments.
But some credit card issuers dont allow mortgage payments. Bank of America credit cards, for instance, cannot be used to pay a mortgage. Wells Fargo credit card holders may have more luck their cards can be used to pay a mortgage as long as the mortgage lender accepts them.
Check with all three parties card network, card issuer, mortgage lender to ensure your payment will process.
Of course, not all mortgage lenders do, but they might be more willing to accept your payment if its processed by a third-party payment service provider like Plastiq.
Its best to check with all three parties card network, card issuer, mortgage lender to ensure your payment will process. Otherwise, you run the risk of a late or declined mortgage payment.
How We Earned Rewards Paying Off The Last $100k Of Our Mortgage
While my husband and I used to work in the mortuary industry, we now make a living as full-time bloggers. Our website, ClubThrifty.com, covers topics that range from personal finance to travel and .
In 2015, we started covering topics like how to pay off your mortgage with a credit card. While there are admittedly very few ways to accomplish this feat since mortgage companies dont tend to accept credit payments directly, there are a few hacks that let you pay your mortgage with plastic.
- You can buy money orders with a credit card and deposit them with your bank toward your mortgage payment, for example.
- But you can also use a third-party service called Plastiq.com to pay bills with credit, including your mortgage payment, rent payment, car loan, utility bills and more.
Currently, Plastiq lets you make mortgage payments with Mastercard and Discover only . When we paid off our mortgage, they charged a 2.5 percent fee for every payment madeor around $25 for each $1,000 paid toward your home loan. This fee has since climbed to 2.85 percent.
Since you typically dont earn 2.85 percent in rewards on your spending, using Plastiq to pay your bills with a rewards card is normally a losing proposition. The only exception is if youre trying to meet a minimum spending requirement to score a huge sign-up bonus. If paying $28.50 or $100 in Plastiq fees lets you earn a sign-up bonus worth $500 or more, then that can make sense.
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What Worked For Them
Some traditional lenders let you use credit cards to make mortgage payments if you use a third-party service, but that will usually end up costing you money. Plastiq, for instance, allows users to place larger purchases on their cards for a 2.5 percent fee.
But the Johnsons found a workaround. Plastiq waives the fee on $1,000 in purchases for every person you refer to the service who makes a qualified payment over $500.
“This strategy worked so well for me because I have referred almost 300 people now with my website,” Johnson tells CNBC Make It. “At $1,000 in fee-free dollars per referral, that is $300,000 in fee-free payments I have earned.”
Without your own financial blog, it’s not as straightforward to load up on referral bonuses, Johnson admits: “You could try referring people to the service using social media, but I’m not sure how easy it would be.”
Mortgage Interest Vs Credit Card Interest
If you are thinking about paying for your mortgage using a credit card, you need to absolutely avoid paying interest on your balances. Mortgage interest rates are a tiny fraction of credit card interest rates.
For example, your credit card might have an interest rate of 20%, while your mortgage loan might only have an interest rate of 3% to 4%. If you make a mortgage payment on a credit card and end up carrying a balance on your credit card, thats a surefire way to pay a boatload in credit card interest fees. This pretty much wipes out the value of any rewards you might accumulate.
This is the equivalent of spending a dollar to save a dime.
So if youre thinking about paying for your mortgage with a credit card, you need to absolutely make sure youll be paying off the balance in full every month without accruing interest fees.
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Is It Worth It To Pay Your Mortgage With A Credit Card
Before making a mortgage payment with a credit card, determine whether its even possible. Cardholders should read credit card terms to determine restrictions. Cardholders should also consider which payment network they have because this could be a major hindrance to making a mortgage payment with a credit card. Check with the mortgage lender to see if any restrictions are placed on the types of payments accepted.
Once the cardholder determines if its even possible, he or she should think about what the ultimate goal is for paying down the mortgage with a credit card. If using a credit card is the last resort due to financial trouble, its probably not a great idea.
Mortgage loans typically have low interest rates . If the cardholder cant pay off a balance before the end of a billing cycle, higher rates would cause an increase in overall cost. Accruing large amounts of debt on a credit account would also increase a cardholders credit utilization rate resulting in a lower credit score over time.
Why Dont Mortgage Lenders Accept Credit Card Payments Directly
There are several reasons for this:
- Lenders have to pay a fee: When a vendor accepts a credit card payment, they have to pay a fee of around 3% which would likely get passed on to customers. Avoiding that extra cost means lenders can offer lower interest rates and fees.
- Lenders have a financial responsibility to maintain with borrowers: Its unlikely that a lender would want to allow customers to pay a low-interest mortgage debt with a credit card, which usually has a much higher interest rate. This practice would make it easier for borrowers to accumulate insurmountable debts and could invite unwanted government regulation.
- Payment companies can prohibit certain credit card transactions: Some merchants might be prohibited or partially restricted from accepting credit cards for specific transactions. Visa, for instance, bars its merchants from accepting credit cards for most debt repayment in the U.S.
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Options For Paying Rent With Other Cards
Some third-party service providers will allow you to pay your rent, mortgage and almost any other bill with virtually any debit or credit card. However, fees range from 2%-3% per credit card payment, or theres a flat fee for payments made with debit cards.
Heres a chart of third-party payment providers that accept credit cards, along with the respective fees.
Alternatives To Using A Credit Card For Your Mortgage
If you’re struggling to afford your mortgage payment, you may be eligible for various relief and assistance programs. You could try to:
- Contact your mortgage servicer before you miss a payment. Share that you’re struggling to afford your payments and whether you expect it to be a short- or long-term issue. The mortgage servicer might be able to temporarily offer a temporary repayment plan with a lower monthly payment or a mortgage modification if you experienced a significant hardship.
- Look into mortgage forbearance. The mortgage servicer may also discuss putting your mortgage into forbearance. Doing so could let you temporarily reduce or stop making your mortgage payments.
- Get help from a housing counselor. You can use the Consumer Financial Protection Bureau’s housing counselor tool or call the Homeowners HOPE Hotline. A housing counselor may be able to suggest different options you can use to stay in your home.
Mortgage lenders often don’t want to foreclose on a home and are willing to work with a borrower to avoid this outcome. There may be a cost to some of these programs or options, but they’re likely much cheaper than the fees and interest you’ll accrue if you start using your credit card to pay your mortgage every month.
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When It Make Sense To Pay Your Mortgage With A Credit Card
For the most part, it does make sense to pay your mortgage with a credit card when youre pursuing a credit card welcome bonus you couldnt earn otherwise. Imagine for a moment that you wanted to apply for a credit card which offers a welcome bonus of 60,000 points after you spend $4,000 in the first 3 months of opening the card. If you dont normally have enough expenses you can pay with plastic to reach the threshold, paying your mortgage with a credit card can leave you significantly aheadeven if you pay a small percentage in fees to do so.
It can also make sense to pay your mortgage with a credit card if youre earning a higher rate of rewards than the fees youre paying. For example, lets say paying your mortgage with a credit card results in 2.5% in fees, but you have a credit card that offers a flat 3% back. In that case, you could pay your mortgage with a credit card, pay your credit card bill in full each month to avoid interest and pocket the 0.5% in rewards.
With all this being said, it doesnt make sense to pay your mortgage with a credit card if you want to spread out your monthly payment or catch up on bills. Your mortgage likely comes with a low fixed interest rate, whereas the average credit card interest rate is currently over 16%. If you transfer secured debt at a low rate to an unsecured credit card that charges a ton of interest, you are setting yourself up for a financial disaster.
Common Challenges When You Pay Mortgage On Credit Card
The biggest obstacle is that a majority of lending companies do not accept credit as a valid form of payment. It makes sense if you think about it because youre basically using one form of debt to cover another.
The mortgage payment companies that do offer some sort of credit card payment system charge as much as 2.5% on every payment you make at an average mortgage payment of $1,500 per month, thats $37.50 in processing service fees alone. It may not sound like much, but that amount stacks up to a whopping $13,500 over a 30-year mortgage.
Plus, if you dont have a handle on your finances, credit card interest charges can blow up your payable amount.
Another similar hurdle is that credit card networks like American Express, Discover, Mastercard, and Visa may not allow mortgage premiums to be charged onto your card. Youll have to check with your issuing bank if you can use your card to pay your mortgage.
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Risks Of Paying Your Mortgage With A Credit Card
While landing big bonus points from a big credit card purchase may sound enticing, trying to pay your mortgage with a credit card is often more trouble than it’s worth and could create more problems than it solves. Here are some of the risks and drawbacks to consider:
- It’s not free: Both third-party processors and money orders have fees, though third-party processors cost a bit more. You’ll also need to be sure to pay your credit card in full each month to avoid late fees and interest charges.
- It’s inconvenient: Each method introduces additional steps to paying your mortgage. Third-party processors require paying through their sites, but you should also check your mortgage payment site to make sure that the payment goes through on time. The gift card method involves buying gift cards and money orders, and possibly mailing in your payment each month.
- It can lead to debt:Whenever you use a credit card, you’re increasing your risk of carrying debt. If you’re not diligent about making payments in full every month, your debt could snowball.
Why You Should And Shouldnt Use A Credit Card To Pay Your Mortgage
If youre able to use your credit card to pay your mortgage, you might pay a processing fee of 2.5-3% unless you use Paytm with a Visa or Mastercard. Such high fees could erase any rewards youll earn from points, miles or cash back.
When its a good idea:
- Youll use a Visa or Mastercard on a service like Paytm. Since its free for these types of cards, you can pay your mortgage payments and rack up rewards points which you can use toward your favourite brands like Amazon and Timmies.
- Itll help you reach a minimum spend requirement for a signup bonus. Signup bonuses typically require spending a few thousand dollars. You can reach yours more easily by paying your mortgage with your credit card. Just make sure that processing fees dont erase what youd gain from your bonus.
- You can defer your mortgage payment. You can take advantage of your credit cards grace period, which is the time during which your balance wont accrue any interest. Instead, you can use the funds for something else before your card bill is due and take advantage of an interest-free period.
When its not a good idea:
Which credit card is the best for rewards?
Theres no best credit card but thats part of the fun. It means you can compare the pros and cons of many cards to find the best one for you. To get started, take a look at our list of the best credit cards.
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Pay Mortgage With A Credit Card: Rules Of The Game
Now that you know where you can pay your mortgage with a credit card, lets cover some things to watch out for.
As you probably know, the credit card company isnt giving you a signup bonus just to be nice. They want to make some money off of you. With the signup bonus, they are hoping to whet your appetite just enough so youll continue spending on the card.
You need to understand that, while the credit card companies make money every time you swipe your card, the real money is made when you carry a balance. They want to suck you in and get you addicted to their drug, so they offer you this fancy free gift so youll take your first sniff.
Always remember, you want to use these rewards to create more freedom for yourself, not less. As such, your job is to avoid falling for their trap at all costs.
If you dont think you can handle it, DO NOT play the game.
To get the most out of your rewards points, you need to make sure to follow 2 simple rules:
Can You Make A Mortgage Payment With A Credit Card And If So Should You
Because there are both benefits and drawbacks to using a credit card, homeowners sometimes wonder whether they can or should put their mortgage payments on their credit card. Different financial experts offer different opinions on whether or not this is a good decision. If youre considering using your credit card for mortgage payments, you should understand how to do it and what the possible risks are.
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What Are The Risks Of Paying My Mortgage With A Credit Card
- Most mortgage companies wont accept payment by credit card, which means you could incur other fees trying to go through a payment service.
- If you cant pay off the balance right away, you risk putting yourself into a downward financial spiral.
- Not only were you paying interest on your mortgage, but now youll potentially be paying added interest on the mortgage payment itself.
- You can just as easily build your credit by simply making your mortgage payment in a traditional manner.
- Your credit utilization could go up, which could damage your credit report and make your credit score go down temporarily.
How To Pay Your Mortgage Or Rent With A Credit Card
So, lets say youve decided that paying your mortgage or rent with a credit card makes a lot of sense. Great!
Whats next? The next step is to figure out the best providers of these services to make these payments for you.
If you are a renter, you might already be making rent payments online by visiting an online portal or website. And on these websites, you might see an option to pay using a credit card. In that case, all youd have to do is just select that option and make your payments.
Making a mortgage payment is a bit more challenging for a number of reasons. For example, making rent payments with credit cards is a more common practice, while making a mortgage payment with a credit card is rarer. Also, your mortgage loan might be sold off numerous times, so figuring out where to even make your payments can be cumbersome if youre not using autopay.
In this next section, well show you how to pay your mortgage or rent with a credit card, starting with the best solution available.
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