Paying your mortgage with a credit card might seem like a convenient way to manage expenses or earn rewards.
However, mortgage lenders typically don’t accept credit cards directly due to high transaction fees.
There are still ways to use a credit card to cover your mortgage, but it comes with risks and considerations.
In this guide, we’ll explore whether you can pay your mortgage with a credit card, the potential benefits and drawbacks, and alternative methods to consider.
Can You Pay Your Mortgage with a Credit Card?
Most mortgage lenders do not accept credit card payments directly.
This is because credit card companies charge transaction fees, which lenders prefer to avoid. However, there are a few indirect methods to make it possible:
- Third-Party Payment Services: Services like Plastiq allow you to pay your mortgage with a credit card by acting as an intermediary. You pay Plastiq with your credit card, and they send a check or bank transfer to your lender. However, these services usually charge a fee of around 2-3%.
- Using a Cash Advance: Some people opt to use a cash advance on their credit card to pay their mortgage. This method involves withdrawing cash from your credit card, which you can then deposit to cover your mortgage. However, cash advances typically come with high fees and interest rates that start accruing immediately.
- Balance Transfers to a Checking Account: If your credit card issuer allows it, you can transfer a portion of your credit limit as cash to your checking account through a balance transfer. This option usually incurs fees but might offer lower interest rates compared to a cash advance.
Potential Benefits of Paying Your Mortgage with a Credit Card
While it’s generally not recommended, there are a few situations where using a credit card to pay your mortgage could make sense:
1. Earning Rewards and Cash-Back
- Using a credit card that offers cash-back, points, or miles can potentially earn rewards on your mortgage payments. However, you’ll need to ensure that the rewards outweigh the fees incurred by using third-party services.
2. Taking Advantage of 0% APR Offers
- Some credit cards offer 0% APR on purchases or balance transfers for an introductory period. In this case, you could delay interest payments on your mortgage by using a credit card with a promotional 0% APR.
3. Meeting Spending Requirements for Signup Bonuses
- If you recently opened a new credit card with a lucrative signup bonus, using it to pay your mortgage could help you meet the spending requirement quickly. However, it’s essential to weigh the fees against the value of the bonus.
Drawbacks of Paying Your Mortgage with a Credit Card
Using a credit card to pay your mortgage can come with significant downsides that could outweigh any potential benefits:
1. High Fees
- Third-party services like Plastiq charge fees of 2-3% per transaction. For a $1,500 mortgage payment, that’s an additional $30-$45 each month, which adds up over time.
2. Impact on Your Credit Score
- Charging your mortgage to a credit card can increase your credit utilization, potentially lowering your credit score. High credit card balances also carry the risk of accruing interest if you’re unable to pay off the full amount by the due date.
3. Risk of High-Interest Debt
- If you’re unable to pay off your credit card balance each month, you could end up paying significantly more in interest than you would on your mortgage. Credit card interest rates are generally much higher than mortgage rates, making this a costly approach.
4. Limited Options for Payment Flexibility
- While some credit cards offer promotional APR periods, these offers are usually short-term. Once the promotion ends, any remaining balance will incur standard interest rates, which can lead to long-term debt.
Alternative Ways to Pay Your Mortgage When Cash Is Tight
If you’re considering using a credit card to pay your mortgage because of cash flow issues, there are safer alternatives to consider:
- Refinance or Modify Your Loan
- If you’re struggling with mortgage payments, refinancing to a lower rate or modifying the loan terms could reduce your monthly payments. This can free up cash without adding high-interest debt.
- Access Home Equity with a HELOC or Home Equity Loan
- A Home Equity Line of Credit (HELOC) or a home equity loan can provide funds at lower interest rates compared to credit cards. These options are generally safer and more cost-effective for covering temporary cash flow issues.
- Use Savings or Emergency Funds
- If possible, use an emergency fund to cover your mortgage rather than relying on a credit card. Emergency funds are meant for unexpected expenses, and mortgage payments fall under essential expenses.
- Set Up a Budget and Prioritize Expenses
- By creating a detailed budget, you may be able to free up enough funds to cover your mortgage without needing to use a credit card. Prioritizing essential expenses can help avoid accumulating high-interest debt.
- Seek Financial Assistance Programs
- There are various programs available for homeowners experiencing financial hardship. Programs such as the Home Affordable Modification Program (HAMP) or the CARES Act mortgage forbearance options may provide temporary relief.
While it is technically possible to pay your mortgage with a credit card through third-party services or cash advances, it’s generally not advisable due to high fees, potential interest costs, and the risk of damaging your credit score.
If cash flow is tight, consider alternative options like refinancing, using emergency funds, or seeking financial assistance.
Using a credit card for mortgage payments should be considered only if you’re confident in your ability to pay off the balance in full and the rewards or benefits outweigh the costs.