What is the price? And when is it worthwhile to do so? This page will answer any issues you may have regarding charging your monthly mortgage payment.
Mortgage lenders do not directly take credit card payments.
If you have a Mastercard or Discover card, you might be able to pay your mortgage with a charge of 2.85% through Plastiq, which is a firm that processes payments.
They provide this service. Considering the costs that are associated with using a credit card to pay a mortgage, the majority of people should avoid doing so.
Oh, absolutely! However, there are times when it becomes a bad choice. You may have to pay a convenience fee to a third party before they even write a check to your mortgage servicer; however, this fee could not cover all of your payments.
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 usually 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.
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What Are The Drawbacks Of Using A Credit Card To Pay Off Your Mortgage?
The most obvious disadvantage of using a credit card to pay your mortgage is the expense of the convenience charge.
Most importantly, credit card interest rates are often higher than mortgage interest rates.
If you change your mortgage to a credit card and then carry a credit card balance from month to month, your mortgage payments will be significantly higher than they need to be.
Is It Possible To Pay My Mortgage Online?
Mortgage servicers frequently accept internet payments straight through their websites these days.
Check your mortgage statement on the firm’s official website. Then, create an online account and link your checking account.
Enroll several days before your payment is due, as it may take that long for your funds to sync. After completing the sign-up procedure, you can schedule your payment.
Alternatively, your bank account may include an online bill-pay option through which you may pay your mortgage.
Please find out how far in advance you must plan your payment so your loan servicer can receive it on time.
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Why Use A Credit Card To Pay Your Mortgage?
There are four reasons why someone would contemplate using a credit card to make their monthly mortgage payment:
1. To gain credit card points
2. to keep their money and earn a few weeks’ worth of interest
3. Purchasing a few extra weeks to pay the mortgage without incurring a late payment penalty from the mortgage company
4. At all costs, avoid foreclosure.
These are legitimate reasons to pay your mortgage using a credit card. The first three factors may give you a slight financial advantage in the long term.
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 with a credit card.
Services For Third-Party Payment
Many creditors, particularly mortgage lenders, will not accept credit card payments to settle the 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 customers to exchange one type of debt—low-interest and sometimes 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 entity may be paid with a credit card through these firms.
While the competitive environment is constantly changing, Plastiq, which charges a 2.85 percent transaction fee, is the most well-known—and ostensibly the only—player that handles mortgage payments.
You might 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.
Mastercard and Discover may discontinue accepting mortgage payments entirely through the program.
Alternatively, more choices for paying your mortgage with a credit card may become available, maybe with more competitive costs or new bonuses.
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Should You Use A Credit Card To Pay Your Mortgage?
Let’s go through each of the four reasons why you might wish to pay your mortgage using a credit card and see whether they’re viable options.
Earning Rewards
There are two 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.
Assume your monthly mortgage payment is $1,000. You will lose $28.50 if you suffer a 2.85 percent charge to make that payment. Nonetheless, you may be able to come out ahead in one of the following scenarios:
• Your credit card gives 3.0 percent or more in recurring cash back (or the equivalent in points or miles) on this payment.
• The charge from a third-party payment processor is not classified as a cash advance by your credit card provider.
Cash advances are often charged fees and begin charging interest immediately. Check your credit card agreement to determine what the cash advance regulations are for your card.
Even if everything appears in order, you should make a modest test purchase through the payment processor before completing your total mortgage payment to ensure that your transaction is regarded as one.
• You’ll receive a sign-up bonus worth more than the processing cost, which you wouldn’t be able to obtain through everyday spending.
This may be the most convincing reason to pay your mortgage with a credit card once or twice.
• You’ll gain some additional credit card advantage from the purchase that is more than the charge, something you wouldn’t be able to earn through everyday spending.
You might try to acquire airline status, hotel status, a free hotel night, or a plane ticket for a companion.
Earning 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 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 debt.
However, the top high-interest savings accounts in 2022 only yield 0.7 percent annual interest. After a 2.85 percent payment processing cost, 25 more days of interest on your mortgage payment will not put you ahead.
To Avoid Paying Late
Mortgage payments are often due on the first of the month. However, many lenders offer borrowers until the 15th month to complete their prices 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. 4
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.
To Prevent Foreclosure
To avoid foreclosure, pay your mortgage with 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 far behind on your mortgage payments a process that your lender can’t begin until three to six months after your late payment, five 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 better to talk to your lender and a housing counselor about a strategy to avoid foreclosure, maybe through a loan modification.
Finally, think about how you use your credit.
Make Use Of Plastiq.Com.
Plastiq.com is a third-party business that allows users to pay several invoices using a credit card for a 2.85 percent charge.
Plastiq.com’s cost was just 2.5 percent not long ago. Therefore, this new fee will significantly reduce incentive returns. Above 3%, flat-rate incentives on all purchases are exceedingly unusual.
While most credit cards may be used with this service to pay bills such as utilities and contractor payments, there are just a handful of card kinds that can be used to pay your mortgage, particularly with Plastiq.com.
Discover and select Mastercard, JCB International cards, and Diners Club International credit cards are examples of these. If you have a different card issuer, your options may be limited.
Assume that each mile is worth one penny in terms of travel. In this case, you can use this card to pay your mortgage through Plastiq.com, receive 3 percent back, and pay only 2.85 percent in fees.
That’s a little reward to chase, but the arithmetic works out, and if your mortgage is high enough, you can still turn a profit without leaving your sofa.
You’re far better off using Plastiq.com for a limited time to receive a sizeable welcome bonus.
If you transferred $4,000 in mortgage payments to this card through Plastiq.com, you’d pay $114 in fees while earning 60,000 points. You’re still $486 ahead if each point is worth one cent.
While paying 2.85 percent on each payment might mount up, the bill payment service allows you to avoid costs if you recommend friends.
Gift Cards Can Be Converted Into Money Orders.
(Please remember that most cards’ terms and conditions prohibit any form of a gift card or cash equivalent purchase from collecting points.)
Your capacity to execute this technique may be location-specific. For example, your local grocery shop may have tight regulations regarding the cards used to purchase money orders.
You may also discover that the average grocery store customer service representative couldn’t care less about how you pay so it may be hit or miss.
Remember that certain banks expressly state that gift cards are a “cash equivalent” and do not accrue points. While this may not be true if you only buy a few gift cards now and again, things may change if you start buying hundreds of dollars in gift cards every month.
It would be best to consider how you would utilize the money orders to pay your mortgage.
This is significant: If you reside near a physical bank branch that holds your mortgage (such as Chase or Wells Fargo), you may visit your bank in person and pay your mortgage payment immediately with money orders.
However, if you have to submit your money orders to your mortgage lender, you should reconsider.
In most circumstances, you may preserve the receipt for your money order and request a replacement if it is lost in the mail, but additional stages and expenses are involved. If your money order is missing, your mortgage payment may also be late, causing even more complications.
It is doubtful that you will earn points through any gift card system.
Credit card issuers have “wised up” to reward making on cash equivalent transactions, so this strategy is less about collecting points and more about using a credit card as a stop-gap measure to pay for a mortgage.
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The Benefits And Drawbacks Of Using A Credit Card To Pay Your Mortgage
• You can prevent late payments by “delaying” the due date with a credit card
• Because mortgage lenders do not accept direct credit card payments, you must devise a workaround.
• Relying too heavily on your credit card to make mortgage payments might quickly exacerbate your financial predicament if you do not keep up with your credit card payments.
• Plastiq charges a 2.85 percent credit card processing fee, which can quickly pile up and may outrun reward earning.
Considerations Of Using A Credit Card To Pay For A Mortgage
Before selecting this choice, there are numerous considerations to consider:
Fees Versus Benefits
Paying your mortgage using a credit card means earning points on a generally significant expenditure.
Credit card reward rates vary per issuer, although they rarely surpass the cost of the fee. A credit card sign-up bonus is one exception.
The Interest Rate
Placing your mortgage payment on a credit card might result in high interest charges if you do not pay off your credit card account in full each month.
Carrying significant continuing balances would rapidly wipe out whatever incentives you could gain in the long run.
The Impact On Your Credit Scores
Utilizing a credit card for mortgage payments would likely deplete a significant percentage of your credit limit and elevate your credit utilization ratio, which is defined as your total debt divided by your whole credit limitations.
This statistic significantly influences your credit ratings, and you should aim to maintain them as low as possible, ideally 30 percent or less. A mortgage payment in the hundreds of dollars will not assist.
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Why You Should Not Use A Credit Card To Pay Your Home Loan
A benefit-risk analysis, as with many financial activities, is recommended. Do the advantages exceed the disadvantages or vice versa?
The Possibility Of A Debt Cycle
If you cannot pay your credit card account in full to avoid interest charges, you risk slipping further into debt.
The long-term cost of paying higher interest rates might rapidly outweigh the benefits of charging your mortgage loan payment.
The longer you go without settling the fee for your mortgage payment, the more difficult it will be to pay your creditor.
Furthermore, becoming trapped in a debt cycle exposes you to payday lending organizations, which entice clients in this condition to take out short-term loans at excessive interest rates.
Expensive Fees
Those transaction costs will accumulate over time if you utilize a third-party payment service.
For example, if you pay your $2,000 monthly mortgage using Plastiq, you’ll be charged a $57 fee each time. If this is a long-term strategy, that’s an extra $684 yearly.
If you fail to make your credit card payment on time, you will almost certainly be charged late penalties by your card issuer.
The Effect On Credit
Your credit usage ratio accounts for 30% of your credit score, and it is typically suggested that your debt proportion remains below 30%.
Alternatives To Using A Credit Card To Pay Your Mortgage
Mortgage Deferment
If you’re thinking of charging your mortgage payment to avoid a late charge or foreclosure, you could be better off obtaining mortgage forbearance instead.
This is an arrangement with your lender to temporarily halt payments for a set time.
Financial Guidance
It is critical to be proactive if you are experiencing financial difficulties.
They will be able to advise you on the best course of action for your scenario.
Avoidable Alternatives
You should avoid taking out a payday loan with high interest rates.
Such interest rates are detrimental to any attempt to avoid financial hardship.
Similarly, credit card issuers charge much higher interest rates for cash advances, making them a wrong choice for making your mortgage payment for the same reasons that payday loans are.
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Final Thought
Before you pay your mortgage using a credit card, be sure you understand all the fees and extra labor involved. In general, you should pursue this option only if you have enough cash in the bank to pay off your credit card in full.
You should only use a credit card to pay your mortgage if the costs are significantly less than the advantage you receive in return.
Consider whether your energy might be better spent somewhere else.
For example, you may discover that you can pay for health insurance or childcare using a credit card without extra fees.
Check to see whether you may use a credit card to pay utility bills, college tuition, contractors you deal with, and any other payments you regularly have.
You may be earning points and miles for years to come with some creative thinking and a few credit card welcome incentives.