Can I pay my mortgage with a credit card?
Credit cards are so simple to use. You can easily get in the habit of making it your default method of payment for everything from a pack of gum to a new living room furniture set.
However, most mortgage lenders won’t accept credit card payments.
From their perspective, it’s a dicey move — you’re effectively using a loan to pay off a loan — and could be a sign that you’re at risk of default. Also, vendors who accept credit cards generally suffer a small fee, something most mortgage lenders are not too eager to take on.
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How can I pay my mortgage with credit cards?
To pay your mortgage with your credit card, you’ll have to use a third party to carry out the transaction. Companies like Plastiq, PayPal and Paytm can serve as a go-between for you and your lender: you pay them with your credit card, and they make the mortgage payment for you.
Unfortunately, they don’t do it for free — they’ll charge you a fee of somewhere between 2.5% to 3% on each transaction. So be prepared to fork over a bit more than your normal monthly mortgage payment.
You might be able to dodge the fees, at least for a while. Plastiq offers a referral program, where if you get a friend to sign up as a new member, they’ll get $500 in free processing, and you’ll get $1,000 in free processing.
But that’s a numbers game, and few people have a big enough social circle to rely on this exclusively.
Is paying my mortgage with credit cards a good idea?
It depends on a few factors: whether you have the funds readily available to transfer to your card, whether the fees and penalties you might face outweigh the benefits of your credit card’s rewards and whether your credit score may be impacted.
At the top of the list of pros would be using your loan payments to help you earn rewards points on your credit card.
Many credit card issuers offer loads of free rewards. Whether you’re saving on travel, hotels or even just getting cash back, there are plenty of reasons why you might want to use your credit card for everything.
Just remember, every third-party service you go through will charge you fees, and you may find that the fees outweigh the rewards you get. If your fee for using a third party costs you 3% of the transaction, and you are getting just 1% to 2% back in rewards, the math isn’t working in your favor.
Some cards also offer sign up bonuses if you spend a certain amount of money in a limited period of time. Putting your mortgage on plastic is one way to hit those thresholds in record time.
And of course, if you’re making payments and immediately clearing the balance on your credit card, you’re going to see a positive impact on your credit score.
This year, the Federal Reserve released a report indicating that credit card debt is at an all-time high.
Credit cards are an expensive way to borrow money, month over month. At time of writing, the average credit card has an interest rate of 16.43% — and with rewards cards, you may be paying an even higher interest rate in exchange for those benefits.
If you don’t have the funds readily available to transfer to your credit card as soon as you use it, this may not be your best option. While you’ll be getting your mortgage payment in on time, you’re likely making bigger problems for yourself financially down the road.
Just like missed mortgage payments, missed credit card payments will badly damage your credit score. Good credit is essential to get affordable rates on financing for cars and other homes in the future.
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Other options for paying your mortgage
Getting rewards points is one thing, but if you’re using your credit card because you’re light on cash, that’s a big problem.
The Federal Trade Commission urges people to address the situation as soon as possible to ensure you have the most options available. You should then get in touch with your loan servicer to request assistance, even if they’ve turned you down for help before.
You could also consider refinancing and take advantage of historically low mortgage rates. Even if you just signed your mortgage last year, you could still refinance and potentially save yourself thousands of dollars over the life of your loan.
It can be a big relief for people who are struggling — and for those chasing rewards points, you can just spend your new savings instead.