Should you pay your mortgage with a credit card?

Paying your mortgage with a credit card may seem like a good idea for credit card point hounds, but the negatives outweigh any positives.

Pat Howard 1600

Pat Howard

Published October 4, 2019

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KEY TAKEAWAYS

  • Using your credit card to pay for your mortgage is not just difficult; it's a bad idea entirely

  • Credit card interest rates are much higher than mortgage interest rates, so it could cost you a lot of money

  • Not only could it cost more to pay your mortgage with a credit card, but it could also hurt your credit score

  • If you still want to pay your mortgage with a credit card for some reason, you may need to do it through a third-party service

When you pay your mortgage, your monthly payments are likely being directly withdrawn from your checking or savings account or you’re issuing your lender a check. You may also be able to pay with your credit card for a fee using a third-party service.

Credit card mortgage payments may sound like a good idea, as the spend potential with mortgage payments is so high that it makes it easier for card-holders to meet minimum spending requirements for signup bonuses and travel rewards. However, no mortgage lenders will let you pay your mortgage with your credit card directly. While there are third-party services available, like Plastiq, who you can charge your mortgage payment to in exchange for cutting your lender a check, be prepared to pay a sizeable transaction fee.

Read on to learn more:

Paying your lender with a credit card directly

You won’t be able to directly pay your mortgage company with a credit card, as the practice of paying down one form of debt (your mortgage) with another form of debt (your credit card) is generally viewed as risky and unsustainable.

However, even if you could pay your mortgage with a credit card, it wouldn’t be the best idea. Credit card interest rates are significantly higher than mortgage interest rates, and you still need to pay both (next month’s mortgage payment and the credit card bill) the following month.

Using a credit card makes it so you’re paying two types of debt payments the following month, and is a fast way to default on either your credit card or the mortgage itself.

Credit card network rules

Credit card networks have their own rules against using debt to pay down other debt. Mastercard is the only card network to allow for both direct debit card and credit card mortgage payments; Visa lets lenders accept it’s debit cards and prepaid cards; and American Express and Discover don’t let you put any kind of mortgage debt on their cards.

Paying your lender through a third-party company

A common way to workaround your lender’s rules against paying for your house with a credit card is to instead go through a third-party payment service that can process your payment and pay the mortgage company itself.

One such company, Plastiq, allows credit card mortgage payments if you have a Discover or Mastercard. The caveat is they charge you a 2.5% fee for every transaction. As we discussed earlier, those fees are a hefty price to pay on top of your expensive monthly housing payment.

But if you’re savvy at churning credit cards and can’t resist that “minimum spend” reward, you may find that the perks outweigh the added fees you’ll be paying.

Why people pay their mortgage with a credit card

People may pay their mortgage on a credit card to allow themselves added flexibility while they gather more cash, but it’s also popular amongst people who flip, or “churn”, credit cards once they meet their minimum spend requirements and reap their rewards. However, churning on mortgage spend still isn’t a very good idea.

Rewards

If you pay your mortgage with a credit card, it will likely be treated as a cash advance, which means you probably won't earn any points on the charge.

But in the unlikely event that you can earn points, mortgages may be the Holy Grail of credit card spend. Payments are typically high, and they’re monthly. If your card network gives you 90 days to hit your $5,000 minimum-spend signup bonus, and your monthly mortgage is $2,500, you’re meeting your minimum-spend in two payments.

However, since most point earnings are between 1% and 2% of payments, and your processing fee with Plastiq is 2.5%, you’d actually be losing points. The only way the added monthly fee may be worthwhile is if the signup reward was, say, a $500 gift card to a store you really liked, but even then you’d still be losing some money on the reward.

Financial flexibility

If you need a few more days to gather some cash to make a mortgage payment and you need a little breathing room, using a credit card is an option. The strategy here would be to pay with your card on your mortgage due date, float the credit card bill until payday, and pay the balance before you’re charged interest by your network.

The risk here is that if you aren’t able to pay off the balance of the card by the end of the month or whenever your credit card balance needs to be paid off, you’ll end up paying interest on your mortgage payment on top of the initial interchange fee. Considering you’re already short on cash to begin with, that's one debt spiral you may want to avoid at all costs.

Why you shouldn’t pay your mortgage with a credit card

Even if you go through a company like Plastiq to handle the legwork, it still doesn’t make much sense to pay your mortgage with a credit card. It has the potential to gravely affect your credit score and accrue unwanted interest and fees that you simply don’t have to worry about when you cut the lender a check yourself.

Interest

You’re also leaving open the possibility of entering an interest conundrum. Carrying a balance on your credit card means paying interest in addition to the fee you’re charged per mortgage transaction. With the average credit card interest rate hovering between 16% and 20%, failing to pay off a $1,500 balance would mean an extra $21.60 on top of your payment processing fee.

Some credit card companies may also consider payments to services like Plastiq as “cash-like transactions”, or a cash advance, which are a bad idea unless you pay off your credit card the day you make the payment. For example, Visa charges you interest from the day you make the advance and every day after that until the debt is fully paid off.

Credit utilization

One of the overriding factors that determines your credit score is your credit utilization ratio. This measures the balance you have on your card versus the maximum amount you’re allowed to spend, or your limit. The general rule of thumb is to keep your utilization score below 30%.

With mortgage payments being so high, it's a risky transaction to make for a card that already carries a balance. For example, say your card’s limit is $5,000 and you charge a $2,000 mortgage payment to your card, you’ve jumped your credit utilization up 40% in just one payment.

Late payments

Ultimately, when you use the third-party payment method, you’re counting on a separate entity to follow through and get a check to your lender by the payment date. If your check isn’t delivered on time, you’ll have to pay a late payment fee. To avoid any potential late fees, be sure to communicate with the third-party company and pay them well in advance of the mortgage due date.

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