Can I Pay My Mortgage with a Credit Card?

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Can I Pay My Mortgage with a Credit Card?

Do you wish to use a credit card to pay your mortgage? It’s doable, but it’ll probably cost you. How do you go about it? What is the price? And when is it beneficial to do so? This page will address any issues you may have regarding charging your monthly mortgage payment.

Key Takeaways

  • Credit card payments are not accepted directly by mortgage lenders.
  • If you have a Mastercard or Discover card, you may be able to pay your mortgage using Plastiq, a payment processing service, for a 2.85% cost.
  • Most of the time, paying your mortgage using a credit card is not worth it because of the cost.

There are four reasons why someone would contemplate using a credit card to make their monthly mortgage payment:

  1. To earn credit card rewards
  2. to keep their money and earn a few of weeks’ worth of interest
  3. To get a few additional weeks to pay the mortgage without incurring a late payment penalty from the mortgage company
  4. At all costs, avoid foreclosure.

All of these are legitimate reasons to pay your mortgage using a credit card. In the long term, the first three of these factors may provide you a tiny financial advantage. The fourth has the potential to be quite damaging. We’ll go through each option in further depth below, but first, let’s look at how to pay your mortgage using a credit card.

Third-Party Payment Services

Many creditors, particularly mortgage lenders, will not accept credit card payments to settle debt. For one thing, the credit card company may charge the institution a transaction fee. But, more importantly, they understand that doing so would entail allowing consumers to exchange one kind of debt—low-interest and often tax-deductible debt—for another with greater interest and no tax benefit. Politicians, authorities, and the news media would have a field day condemning such behavior.

Third-party payment processors come into play. Almost any organization may be paid with a credit card via these firms. While the competitive environment is always changing, Plastiq, which charges a 2.85% transaction fee, is the most well-known—and ostensibly the only—player that handles mortgage payments. You may be able to discover a referral code online that grants you a few hundred dollars in fee-free purchases, but that will only carry you so far—unless you can earn additional free transactions by recommending others.

Even with Plastiq, paying your mortgage using a credit card has significant limitations. The rules and conditions for Plastiq forbid you from paying your mortgage using a Visa or American Express card. Plastiq may not be available forever, or it may not always be an option for making mortgage payments, given the history of other payment processors. Mastercard and Discover may discontinue accepting mortgage payments via the program entirely. Alternatively, additional choices for paying your mortgage with a credit card may become available in the future, maybe with more competitive costs or new bonuses.

Should You Pay Your Mortgage with a Credit Card?

Let’s go through each of the four reasons why you may wish to pay your mortgage using a credit card and see whether they’re viable options.

To Earn Rewards

There are two sorts of credit card incentives: sign-up bonuses and recurring benefits. A sign-up bonus may provide you with $300 cash back if you spend $3,000 in your first three months as a cardholder. Ongoing incentives may offer you 2% back on all purchases, even those made to receive the sign-up bonus.

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Assume your monthly mortgage payment is $1,000. You will lose $28.50 if you suffer a 2.85% charge to make that payment. Nonetheless, you may be able to come out ahead in one of the following scenarios:

  • On this payment, your credit card provides continuous cash back (or the equivalent in points or miles) of 3.0% or more.
  • Your credit card company does not consider the charge from the third-party payment processor to be a cash advance. Cash advances are often charged fees and begin charging interest immediately. Check your credit card agreement to find out what the cash advance regulations are for your card. Even if everything seems to be in order, you should make a modest test purchase via the payment processor before completing your full mortgage payment to ensure that your transaction is regarded as one.
  • You’ll get a sign-up bonus worth more than the processing cost, which you wouldn’t be able to obtain via normal spending. This may be the most convincing argument to pay your mortgage with a credit card once or twice.
  • You will get some additional credit card advantage from the purchase that is more than the charge, which you would not be able to obtain via normal spending. You might attempt to acquire airline status, hotel status, a free hotel night, or a free plane ticket for a companion.

As of this writing in April 2022, the average credit card interest rate is 19.49%, which is more than three times the average 30-year fixed-rate mortgage interest rate of 5.39%. If you don’t pay off your credit card debt in full by the due date, your card will become an extremely costly means to pay your mortgage.

To Earn Interest

You enjoy an interest-free grace period on your purchases if you don’t carry a credit card debt. This time lasts around 21 to 25 days, beginning with the issuance of your credit card statement and ending when your payment is due.

Taking advantage of this grace period by holding your cash in savings (where it collects interest) until your credit card due date might earn you a few additional dollars over the course of a year. It’s not a terrible idea to make purchases you were planning to make anyway, as long as you never pay late or carry a debt.

However, the top high-interest savings accounts in 2022 only offer 0.7% interest per year. After a 2.85% payment processing charge, 25 more days of interest on your mortgage payment will not put you ahead.

To Avoid a Late Payment

Mortgage payments are often due on the first of the month. However, many lenders offer borrowers until the 15th of the month to complete their payments without incurring a late charge. Once the grace period expires, lenders apply steep late fees (check your account to see how much), but a late payment will not be recorded to credit bureaus until it is 30 days past due.

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If you need longer than the 15-day grace period to pay your mortgage but want to avoid a late charge and credit score harm, you might pay your mortgage using a credit card on the 14th to buy yourself around 25 more days, provided you don’t carry a load on your card.

If the payment processor’s cost is less than your lender’s late fee and you pay off your credit card debt in full before the due date, you may come out ahead. If you don’t, you may find yourself in greater financial straits as a result of credit card interest, depending on how long it takes you to return what you owe.

To Avoid Foreclosure

To prevent foreclosure, pay your mortgage using a credit card, which is a continuation of the previous approach. It’s normal to want to do whatever to stay in your house. Nonetheless, if you’re so far behind on your mortgage payments that you’re facing foreclosure—a process that your lender can’t begin until three to six months after your late payment, depending on where you live—your financial situation is probably so precarious that adding credit card debt to your problems isn’t in your best interests. It’s definitely a better idea to talk to your lender and a housing counselor about a strategy to prevent foreclosure, maybe via a loan modification.

Final Tip: Consider Your Credit Utilization

Another thing to think about is how credit card mortgage payments affect your credit utilization ratio, which is the proportion of your credit line that you’re using when your statement is published. Credit usage accounts for 30% of your credit score, according to FICO, which develops the credit ratings used by the majority of large lenders. If you don’t want the fact that you’re paying your mortgage with a credit card to harm your credit score, you must pay off your debt before your statement is printed, not just before the due date.

However, if you have a large credit line and just use a little portion of it—say, less than 10%—you don’t need to worry about settling your amount before your statement arrives. A credit usage percentage this low is unlikely to impact your credit score.

An Example of Paying Your Mortgage with a Credit Card

Who wouldn’t want to pay their mortgage with a credit card after reading a headline like “How We Earned $2,000 in Credit Card Rewards Paying Off Our Mortgage?” It’s a genuine tale, and personal finance writer Holly Johnson utilized the prizes to help afford a Mediterranean trip for her family of four.

However, she was only able to do so because her high-profile blogging platform enabled her to earn thousands of dollars in free Plastiq transactions by recommending her followers to the service. Most of us are incapable of doing so.

Nonetheless, if you have good credit, there are several ways to earn big credit card sign-up bonuses. All you have to do is spend a set amount of money within three months after receiving the card.

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Can You Pay Your Mortgage With a Credit Card?

Yes, but it isn’t always a good idea. Third-party payment providers may take your credit card payment and then cut a check to your mortgage servicer, but the convenience charge you’ll pay may be insufficient.

One decisive element in using a credit card to pay a mortgage is having a credit limit big enough to absorb your mortgage payment on top of any other costs you normally charge to your card. Another consideration is the worth of any prospective credit card benefits. Unless you’re looking for a sign-up incentive, they are unlikely to be more than the convenience fees.

When Does it Make Sense to Charge Your Mortgage to a Credit Card?

When the value of any credit card rewards—cash back, points, or airline miles—is more than the cost of the transaction convenience fee, charging your mortgage payment to a credit card makes sense.

What Are the Downsides of Using a Credit Card to Pay Your Mortgage?

The most obvious disadvantage of using a credit card to pay your mortgage is the expense of the convenience charge. Another concern that is sometimes neglected is that paying your mortgage with a credit card may significantly raise your credit use and negatively impact your credit score.

Most importantly, credit card interest rates are often higher than mortgage interest rates. If you charge your mortgage to a credit card and then carry a credit card debt from month to month, your mortgage payments will be significantly higher than they need to be.

Can I Pay My Mortgage Online?

Mortgage servicers often accept internet payments straight via their websites these days. Check your mortgage statement for the official website of the firm. Then, create an online account and link your checking account. Enroll several days before your payment is due, since it may take that long for your accounts to sync. After completing the sign-up procedure, you will be able to schedule your payment.

Alternatively, your bank account may have an online bill-pay option through which you may pay your mortgage. Find out how long in advance you must plan your payment in order for your loan servicer to receive it on time.

The Bottom Line

The ordinary individual will only gain from charging mortgage payments on a credit card in certain circumstances. First, you’ll need to identify a third-party payment processor that allows you to pay your mortgage company using a credit card. Second, you must receive credit card rewards that are more than the payment processing cost. Third, to prevent incurring interest and perhaps harming your credit score, you must settle your credit card amount in full, preferably before your statement is released. If you can achieve all of these things, paying your mortgage using a credit card may be advantageous.

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