How to Pay Your Mortgage With a Credit Card
When you have a lot of expenses, paying off your mortgage on time can be challenging. For example, you might not have enough money in the bank to make your payment after other higher-priority expenses, such as food and utilities. Such circumstances might force you to wonder if you can pay your mortgage with a credit card. Let’s see if that can be a last resort:
Can You Pay Your Mortgage with a Credit Card?
Given that you own both your credit card and mortgage, you’d think it would be simple to use the former to pay the latter, but that’s not the case. It turns out that most lenders are loath to allow what they call “debt-for-debt” payments, i.e., using one form of debt to pay off another.
To determine whether you are allowed to pay your mortgage with your credit card, you will need to read your issuer’s credit card terms, and the terms of the payment network they use (e.g., Discover, American Express, Visa, or Mastercard). You will also need to consult your mortgage lender about whether paying your mortgage with a credit card is allowed.
Ways To Pay Mortgage With Credit Card
Most creditors and mortgage providers will not permit using a credit card to pay a mortgage. Let’s go over their reasons for that.
The first reason is that they will need to pay a fee to the credit card processing company – something they generally don’t like doing. More importantly, though, lenders don’t like the idea of borrowers trading one form of debt for another.
t’s in their interest to keep mortgage holders solvent, since too much debt means lenders won’t get their money back, let alone earn interest on it.
Still, you can circumvent this: You could simply put your day-to-day expenses on your credit card and free up your bank balance for mortgage payments. Also, as with most things in the financial world, there are companies willing to make exceptions.
For example, in the US, the payment processing company Plastiq will clear virtually any credit card payment for you, including those for mortgages. This way, you can pay off your mortgage with a credit card.
There are some downsides, though. You will need to pay a 2.85% transaction fee to the operator, unless you qualify for free purchases (e.g., as part of a welcome offer or rewards system), and the service may not last forever.
Other payment processing companies have gone out of business, and Plastiq could very well join them. Many providers do not allow the use of credit cards to pay mortgages at all. Therefore, if you use Plastiq, you might need to rely on their network entirely.
Why Make Mortgage Payments with a Credit Card?
Given the fuss involved, why would people be keen on making mortgage payments with credit cards?
Perhaps the biggest incentive is the fact that making credit card purchases lets people earn generous rewards. Putting a large fixed expense, like a mortgage, on a credit card, helps build total spending, increasing the perks the owner qualifies for.
As mentioned, Plastiq demands a 2.85% processing fee, meaning that if you spend $1,000 on your mortgage every month, you’ll lose $28.50 in fees. However, if you get back 2% on every purchase you make, that cuts the net cost to just $8.50 per month.
What’s more, there may be situations where you are actually in profit. For example, if you use a credit card to pay the mortgage and that qualifies for 3 percent cash back, you could be $1.50 better off per month.
You could also make money if the sign-up bonus for setting up a new credit card account is bigger than the processing fee. For instance, just for signing up, you might get $20 in cash, plus 2% cash back on all purchases over $500.
In that case, you might be better off by putting one or two monthly mortgage payments on the card.
Additional spending may also grant you access to credit cards you wouldn’t otherwise qualify for (e.g., gold or platinum versions).
These may then let you earn rewards that make it worth paying monthly transaction fees, such as hotel stays, air miles, or free travel upgrades.
Late Payment Avoidance
Many people make mortgage payments with credit cards to avoid missing deadlines. Lenders typically give borrowers until the 15th of the month to make their payments without incurring a late fee.
However, beyond that, charges increase, and banks report late payments to credit bureaus after 30 days.
If you get to the 14th and can’t make the payment, it might be better to charge it to your credit card, provided the processing fee is lower than the bank penalty. If the late charge is small, pay late, but no later than 30 days after the due date.
If you are at risk of missing the payment, you will need to make a judgment call on whether to avoid the processing fees or maintain your credit score.
In many cases, you can come out ahead, provided the late fee is higher than the cost of processing the credit card payment.
However, you should ensure that putting part (or all) of your mortgage on your credit card won’t increase your utilization ratio to the point where that damages your rating anyway.
You can also use credit cards to pay mortgages to earn interest. The idea is simple: Use credit cards’ interest-free grace period to pay the mortgage and put the capital that would have gone towards the payments in a savings account.
Those savings will accrue interest, and once they do, pay off your credit card balance with them. Interest accumulation is small in a single month, but these accumulations stack up over the course of a year.
Lastly, if you are over three to six months late in paying your mortgage, lenders can take action to foreclose on your home, depending on the state you live in.
In this situation, some people look for hacks to pay their mortgage with credit cards so they can keep their homes.
That said, if you are already in a position where you can’t pay the mortgage, adding high-interest debt to your credit card might not be a good idea.
In this situation, it may simply be better to foreclose on your existing property, allow the bank to recoup lost capital, and then move to lower-cost accommodation.
The Bottom Line
Technically, it’s possible to pay a mortgage with a credit card, but you need the stars to align, i.e., the card issuer, payment network, and mortgage lender to agree that a credit card is a legitimate way to pay.
In some cases, you may be able to rig the system so that you come out better off after paying off your mortgage balance with credit cards, but you need to ask whether it is worth the effort.
Snatching small profits from the system is possible, but also risky: If you fail to make credit card repayments on time, you may get charged interest and late fees, leaving you worse off.
Generally speaking, you should not use credit cards to avoid foreclosure unless you are guaranteed to receive a higher income soon, perhaps because of a promotion at work. You’ll need more money coming in to pay off additional debts that you incur.
How can I pay off my mortgage faster with a credit card?
You can’t necessarily pay off a mortgage faster with a credit card. However, you can make payments when you don’t have enough cash from income or investments to do so.
Can I pay my mortgage with cash at the bank?
Taking cash to the bank and paying off a mortgage is extremely uncommon. Most banks set up direct debits from customer accounts and then make withdrawals that way. Alternatively, customers pay by bank transfer or monthly debit card payments. Credit card payments are extremely rare but, as discussed here, still possible.
Can I use my credit card after mortgage approval?
You can use your credit card after a mortgage approval. However, to prevent any damage to your credit rating, you should wait at least a day before applying for credit cards after approval is given.
Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.
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