Paying Your Mortgage With a Credit Card: A Possibility, But Not Recommended
Choosing to pay your house mortgage with a credit card is appealing for two reasons: to score credit card rewards or when accompanying monetary hardships. However, some deciding factors come into play, such as your credit card issuer, mortgage firm, and the credit card network. It might appear convenient, but it's crucial to think about the potential hazards and downsides as well.
Your Mortgage Lender Probably Won't Accept Credit Cards
First and foremost, unfortunately, most mortgage firms don't let you use your credit card to pay your regular mortgage fee monthly due to those 3% processing fees the lender would have to pay to the credit card company.
A few workarounds exist, such as third-party payment services that allow you to make mortgage payments with a credit card. They do charge convenience fees of 2.5-3.5%, which would often offset the cash rewards or points you might earn.
Another option is seeking a cash advance from your credit card and using it for your mortgage. Yet, cash advances feature upfront fees and higher interest rates than standard transactions, leading to extra costs.
The Interest Could Be Way Higher than Your Mortgage Rate
Even if you find a service that lets you use your credit card for mortgage payments, you must consider the impact on your credit card's interest rates. If you can't fully pay your credit card statement when due, expect high interest charges, effectively negating any rewards you gained. This could increase your overall debt, making it harder to fulfil future payments.
Where It Makes Sense
Using your credit card to cover your mortgage could be reasonable in specific scenarios:
- To meet a card's minimum spending requirement for a big signup bonus
- In case of temporary cash flow issues, and you need to cover the mortgage payment before your next payday
- Utilizing low-interest balance transfer deals to shift mortgage payments to a lower interest rate.
Yet, in these cases, you must have a clear plan on how to pay off your credit card debt.
How to Pay Your Mortgage with a Credit Card without Fees
For those wanting to collect credit card rewards despite the potential fees, consider these methods:
- Pick a credit card that offers 0% introductory APR on purchases for a limited time, possibly up to 18 months. If you can clear your mortgage payment during this grace period, you can sidestep interest charges.
- Consider using a third-party service to avoid working with your lender directly. These platforms charge a fee but less than your lender might demand.
- Look into negotiating with your lender to drop or reduce the convenience fee. If your credit history is good or your relationship long-lasting, some might agree.
The Final Word
The significant risk here is getting overwhelmed by debt if you fail to pay off your credit card balance every month. While mortgage payments are substantial costs, charging them on your credit card long-term can escalate into unmanageable debt due to high revolving credit interest rates. In summary, only use your credit card to pay your mortgage when you have a short-term strategy and a clear plan to completely pay off your credit card balance. Otherwise, the disadvantages generally outweigh the rewards for the typical homeowner.
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Despite the possibility of earning credit card rewards or addressing monetary difficulties, using a credit card to pay your mortgage is generally not recommended due to the high processing fees and potential downsides. Unfortunately, most mortgage lenders do not accept credit card payments directly.
Even if you manage to find a service that allows credit card payments for mortgages, you must evaluate the impact on your credit card's interest rates. If you can't fully pay your credit card statement on time, high interest charges can accumulate, negating any rewards and potentially increasing your overall debt.
