Can You Pay Your Mortgage With a Credit Card?
You might be able to pay your mortgage with a credit card, but it’s best that you tread with caution.
Most mortgage providers don’t accept credit card payments directly. However, there are workarounds that let you use your credit card to make payments toward your mortgage, one of which includes using the services of a third-party payment processor. However, doing so requires that you pay an added fee. Using a credit card to pay a mortgage might work well for you if you stand to benefit by earning rewards or your need for extra money is limited to the short term.
On This Page:
Most mortgage providers do not accept payments via credit cards.
You may use an intermediary to pay your mortgage with a credit card.
Paying your mortgage with a credit card might hurt your credit score.
Why Pay Your Mortgage With a Credit Card?
You might be tempted to pay your mortgage with a credit card, and it may indeed be beneficial under certain circumstances. However, given the high interest rates that come with credit cards, consider moving forward only if you’re sure you’ll be able to pay off your balance in full before the next due date.
Rewards credit cards enable you to earn rewards in two ways — through the purchases you make and through welcome bonuses that come with spend-based requirements. For instance, you might stand to earn 100,000 bonus points by spending $3,000 on purchases in the first three months.
Let’s say you make a $2,000 mortgage payment with a rewards credit card by using a third-party service provider such as Plastiq. Given its 2.85% fee, you need to pay an extra $57. For this transaction to be beneficial for you, the value of your card’s welcome bonus or regular rewards should be more than this amount. For instance, if a credit card offers 3% or more as cash back, using it to pay your mortgage in this way can help save some money.
You may also pay a mortgage with a credit card if you stand to earn a benefit that outweighs the cost of the transaction. These may come in the form of free hotel nights, free companion flight tickets and loyalty program status upgrades.
Avoid Late Payments
Most mortgages are due on the 1st of each month. However, it’s common for mortgage providers to offer a 15-day grace period for payments to arrive before charging late fees. The late fees you need to pay are mentioned in the promissory note and typically vary from 4% to 5%. If you’re sure you’ll be able to pay off your credit card balance in full before its next due date, paying a 2.8% fee to a third-party payment processor might be worth it to avoid a 5% late fee. What might also help in this scenario is that your credit card gives you an additional grace period that begins at the end of a billing cycle and lasts until the next due date.
If you plan to take advantage of a credit card’s grace days to keep the money in a savings account and, therefore, allow it to earn interest, you might want to think again. The interest you earn through a savings account will, in all likelihood, be lower than the fees you need to pay to a third-party payment service provider. Additionally, the interest that you earn may be taxable, which greatly diminishes this strategy's appeal.
If you’ve fallen behind on your mortgage and face foreclosure, using a credit card to make payments might not be in your best interest. This is because you’ll essentially be moving a low-interest loan to an instrument that comes with a much higher rate of interest. In such a scenario, discussing your situation with your lender might lead to some workable solutions. You might also benefit by seeking assistance through a reputable credit counseling agency.
Should You Pay Your Mortgage With a Credit Card?
While you can pay a mortgage with a credit card by using a third-party payment processor depending on the card you have, you should consider doing so only if the rewards or benefits override the fee. If you’re already burdened by credit card debt, taking this path might not be the best way forward. Not only can it hurt your creditworthiness, but it might also result in higher interest charges.
Another aspect you need to account for is whether your credit card provider treats the payment as a cash advance — particularly if you use a convenience check provided by your credit card issuer to make a mortgage payment. If your card issuer treats your mortgage payment as a cash advance, expect to pay a cash advance fee of up to 5%. In addition, interest starts accruing on the paid amount from the date of the transaction. What makes matters worse is that a card’s cash advance rate can be notably higher than its purchase rate.
Another scenario in which you may consider paying a mortgage with a credit card is if you’re unable to make your regular payment before the end of the grace period and wish to avoid a late fee and its negative effect on your credit report. In this case, the fee you need to pay to an intermediary might be less than the late fee charged by your mortgage provider.
From a creditworthiness perspective, this might be worth it only if you pay your credit card’s entire balance before it’s billed again. If you’re unable to do so, you can expect your credit utilization ratio to increase, all the more so because mortgage payments are typically large. Credit utilization ratio refers to the amount of credit you’ve used from your combined revolving credit limit and should ideally remain below 30%.
How to Pay Your Mortgage With a Credit Card
Paying your mortgage with a credit card might be possible and beneficial in certain circumstances. There are also a few other options to consider.
Use an intermediary
If you wish to use a third-party payment service provider such as Plastiq, you typically initiate the process online. First, you need to make a credit card payment to the intermediary. It then sends your payment to your mortgage provider electronically or via a check. If you use Plastiq, you’ll need to pay a 2.85% fee. One drawback with using Plastiq is it only accepts mortgage payments via Mastercard and Discover credit cards.
Get a cash advance
While it’s possible to get a cash advance on your credit card and make a mortgage payment, it is best avoided. This is because of the high cash advance fee and the high APR that kicks in soon after you take the advance. One scenario in which this might work as a feasible alternative is if you’re very close to the end of the mortgage payment’s grace period and you are sure you‘ll be able to repay the entire amount on your credit card in a few days.
The gift card/money order method
This method might be worth considering if your mortgage provider accepts payments via money orders. However, what also needs your attention is whether your credit card provider views gift card and money order purchases as cash advances. Consider moving forward only if you’re confident these purchases are treated as regular purchases.
A handful of establishments, such as Western Union and 7-Eleven, give you the ability to buy money orders with credit cards by paying a fee. In this case, you visit a physical location to buy your money order and then mail it to your mortgage provider or hand it over in person. Another option is to use your credit card to purchase a PIN-enabled Visa/Mastercard gift card, which you then use to buy a money order. Bear in mind that both transactions involve paying fees.
If you don’t plan to hand-deliver the money order to a physical branch of your mortgage provider, make sure you account for the time it'll take to get there by mail. In addition, if your money order is misplaced, tracing it can be tricky and involves an additional fee.
Other Questions You May Have About Rewards Cards
Checking answers to other commonly asked questions about whether you can make a mortgage payment with a credit card, as well as its pros and cons, will help you better understand if this is the right approach for you.
Now that you have more information about how to pay a mortgage with a credit card, determine if doing so might work well for you from the rewards or benefits point of view. If you wish to move forward to capitalize on rewards, look for a rewards card based on factors such as reward rates, annual fees and added perks.
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About the Author
- Consumer Financial Protection Bureau (CFPB). "What is a grace period for a credit card?." Accessed February 8, 2022.
- Plastiq. "Learn About Supported Payment Types by Card Brand on Plastiq." Accessed February 9, 2022.
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