Wouldn’t it be really cool if you can use your credit card to pay your mortgage?
Just for the cash back or point rewards alone, that would be a good incentive to course your big mortgage payment through your card. And imagine the lead time it can give – instead of paying your mortgage in cash today, you can pay later when the credit card bill comes in.
The bad news is, most mortgage services do not allow their borrowers to pay their mortgage via credit card. For the others that do, they assess additional processing fees if you use your card. The fees are no joke because they range from 1 to 3 percent of the transaction amount, depending on who issued the card. Technically, it’s the landlord or the bank that would have to shoulder the cost to allow credit card mortgage payments.
Debit and Prepaid May Work
Visa lets mortgage lenders accept Visa debit and prepaid card payments. Mastercard permits the use of debit and credit cards for mortgage payments. Still, there are credit card issuers who do not allow homeowners to pay their mortgage through their credit cards. For example, you can’t use Bank of America credit cards to pay a mortgage. Wells Fargo credit card holders are more fortunate because they can use their cards to pay a mortgage as long as the lender is okay with it.
You may find a few third-party services that will help you get around some of the obstacles if you pay a fee. Of course, it will only be to your advantage if you’ll earn more rewards in the process than the fee you’re paying. Do some computations to see if this is the right option for you.
Benefits of Using a Credit Card
Is there really a benefit to charging your mortgage to your credit card when you will pay it anyway? The truth is, you can still come out ahead in some cases. Here are a few of them:
It helps You Meet Your Credit Card Spending Requirements
Many credit card rewards programs will give new cardholders bonus points if they meet spending thresholds within a certain period. For example, if you have an airline card that gives you large bonus points when you charge $2,000 within the first few months of opening an account, your rent payment may do the job. You can quickly reach your goal and earn a few free flights easily enough.
You Can Earn Rewards On Your Mortgage Payment
You may earn substantial rewards when you pay your mortgage with your credit card. But before you opt for that choice, compare the rewards against any transaction fee that you may pay. For example, if you were to earn a 2% reward on the transaction, paying a $2,000 mortgage would gain you $40. If the processing fee is the same or higher ($40 to $60), then it’s not a good idea.
Here’s another one. Your card issuer will give you 70,000 bonus points if you spend $3,000 in purchases for the first three months of having the card. For most card companies, you must spend between $1,000 to $5,000 within the first 90 days of opening your account to get the bonus points they offer.
It Comes In Handy When There’s An Emergency
Taking advantage of the billing cycle when you use your credit card to pay your rent or mortgage may come in handy if you find yourself short on cash. This allows you to float the bill until you get your hands on some cash come next payday.
Drawbacks to Paying With a Credit Card
Although there are benefits in paying your rent or mortgage with a credit card, there are also a lot of disadvantages.
Your Monthly Mortgage Cost Might Increase
If your mortgage lender does agree to accept credit card payments, it will be in exchange to you paying a transaction fee to process the payment.
Whether it’s the mortgage lenders themselves or the companies they hire to process the credit card payments, they would pass the 2-3 percent fee to the borrower. This brings your monthly mortgage cost a little higher. You can also go through a third party company to do this but you’ll still pay a fee within the same percentage.
It Will Impacts Your Credit Score
One significant factor that affects your credit score is the credit utilization ratio.
The credit bureaus measure how much credit you are using in relation to the total credit you have available. For example, if you have a credit card with a limit of $10,000 and you’re total outstanding balance is $5,000, you have a credit utilization ratio of 50%. Just have enough available credit to accommodate your mortgage payment and any additional fees that the lender may charge. You can recover the credit points you’ve lost due to high credit utilization once you pay your credit card balance down and bring it below the 30% level of your credit limit.
When You Should Consider Paying A Mortgage By Credit Card?
One of the most justifiable reasons to add cost to your rent is when you need to meet a certain level of spending to qualify for a sign-up bonus. Some credit card companies give considerable signup bonuses if you spend a certain amount using your card during the first several months. A big expense such as your rent or mortgage payment would let you meet that spending level easily enough. But always do some computations if the points, miles, bonus, or rewards you’ll get is significantly more than the additional fee that you have to shoulder.
If you have a new card and you really want to meet the minimum spend they require to earn a bonus, using your card to pay for your mortgage is better than using your card to buy things you don’t need just to bring up your spending. So, if you need to meet a certain spending limit to get a generous reward, the extra fees would be reasonable. Otherwise, it’s not worth paying more charges.
Third-Party Options For Paying A Mortgage With A Credit Card
1. Plastiq
This third-party company that allows customers to pay with their credit cards merchants or expenses that don’t accept credit cards. They also facilitate mortgage payments if you have a Discover or Mastercard credit card. Right now, Plastiq does not accommodate Visa and American Express. Plastiq charges a flat 2.5% for using their services – including mortgage payments.
2. Cozy
This property management platform is basically for the convenience of landlords but part of their services makes it possible for tenants to pay their rent using a debit or credit card by paying a 2.75 percent transaction fee. As extra service, they report the rent payments to Experian, enabling the tenants to build their credit as they make their payments on time. Since this caters primarily to landlords, they will have to enroll in the service first.
3. Venmo
This is a peer-to-peer payment app that lets you send and receive money to or from anyone for whatever purpose. If the landlord is willing to accept rent payments through Venmo, it will be more convenient for the tenant. It’s free for debit transactions but there’s a 3 percent fee if the payment comes from a credit card. The landlord should create his own Venmo account for the transaction to proceed.
Cash Advance to Pay Your Mortgage
Perhaps the simplest and most direct way to pay your monthly mortgage using your credit card is by getting a cash advance. Most card issuers allow cardholders to draw cash from an ATM using their credit cards. The catch is, the interest rates for a cash advance are much higher than regular purchases so it’s a good idea to pay back the advance the soonest time possible. Also, there’s a cash advance fee for every transaction which runs to around $5 or five percent of the cash advance amount.
Best Credit Cards to Pay Your Mortgage With
Interestingly, paying the rent or mortgage via a credit card has not caught fire as fast as other transactions over the past few years. So, before you apply for any of the cards we will mention below, check with the card company and issuer, as well as your mortgage company, if you can actually pay through Plastiq and that you will be eligible for rewards.
There isn’t one credit card that we can say is perfect for paying mortgages, but here are a couple of options you can look at because they have the best basic spending rewards. If you really want to use your card for mortgage payments to reach a minimum spend requirement for signup bonuses, simple look for the best credit card signup bonus offers online.
Of course, you won’t completely offset the minimum 2.5% fee but what you get in bonuses and rewards could cushion it a great deal. For instance, the travel cards will let you offset the fee in case you get your hands on a good travel redemption package.
Bottom Line
If you can find your way around the different means to make it work, paying your mortgage with a credit card is an option for as long as the rewards will cover the fee. If it won’t hurt your credit and not mess up your budget, you may consider it.
However, if you’re already in a situation where you’ve nearly maxed your credit card, or if you’re anticipating a lot of bills to come in this month, charging a huge expense such as your mortgage on your credit card is not going to help fix the situation. You could damage your credit scores and put yourself in a worse financial situation over the long term in case you will not be able to pay your credit card bill in full subsequently.
