Mortgages are one of the biggest expenses people have each month. For some, it can feel like they’re spending more on their mortgage than they are on food. So, you might wonder can you pay the mortgage with a credit card? The simple answer is yes, but before you start charging, there are a few things you should know. Check out our blog post and get all the necessary information.
Why Should You Pay Mortgage With A Credit Card?
There are many reasons why you might wonder can you pay your mortgage with a credit card, and some of them are:
- to accrue credit card benefits,
- to keep money and accumulate a few additional weeks’ worths of interest,
- to avoid paying the late fee by buying a few extra weeks to pay the mortgage,
- to avert foreclosure as much as possible.
These are all good justifications for using a credit card to pay your mortgage. Thanks to the first three of these factors, you might have a modest financial advantage in the long run. However, the fourth might be really harmful.
Can You Use Third-Party Payment Services to Pay off the Mortgage?
Mortgage lenders are among the several creditors who won’t accept credit cards as payment. For starters, the credit card company might charge a transaction fee. But more importantly, the main reason why mortgage lenders won’t accept credit card payments is the fact that by doing so, they would allow clients to go from one type of debt. The one with relatively low interest and occasionally tax deductions to one with greater interest and no tax break.
And that’s where third-party payment processors come into the game. These credit card processing companies allow clients to use plastic to pay for almost anything. However, remember that paying a mortgage with plastic comes with restrictions. That’s why before you try to do it, contact your credit card processing company and get all the necessary information. With all the gained info, you’ll be able to use credit card processing services that third-party companies offer and pay off the mortgage without bigger issues.
Can You Pay the Mortgage With a Credit Card And More Importantly Should You?
As we said, you can pay the mortgage with plastic. However, before you do, let’s go over the reasons why you might want to do it and see if they are a good idea.
How Can You Pay Your Mortgage With a Credit Card And Earn Rewards?
Sign-up bonuses and ongoing benefits are the two primary categories of rewards cardholders are presented with. Depending on the sign-up incentive, you could receive $300 in cash back after spending $3,000 in the first three months of membership. You might receive 2% cash back from ongoing incentives on all transactions, including those you make, in order to receive the sign-up bonus.
For example, if your mortgage payment is $1,000, you will lose $28.50 if a 2.85 percent fee is added to the payment. Still, there are a few ways you can get around these situations:
- When your credit card gives continuing cashback of 3.0 percent or more,
- When a credit card company does not categorize payment from a third-party processor as a cash advance,
- When you earn a sign-up bonus, that is worth more than a processing fee.
How Can You Earn Interest When Paying With Credit Cards?
Did you know that you are granted an interest-free grace period on the purchase if you don’t have credit card debt? This happens between when the statement is issued, and your payment is due. The period lasts about 21 to 25 days.
Utilizing this grace period to your advantage and conserving your money until your credit card due date, where it earns interest, could net you a few additional dollars over the course of a year. As long as you never pay late or carry a balance, making purchases that you would have made anyhow is not a bad idea.
However, the top high-interest savings accounts in 2022 only offer a 0.7 percent yearly interest rate. After a 2.85 percent payment processing cost, 25 additional days of interest on the mortgage payment won’t result in a profit for you.
How Can You Avoid Late Payment?
The first of each month is typically when your mortgage is due. Many lenders, though, give customers until the 15th to settle their bills without incurring late fees. However, late payments won’t actually be recorded by the credit bureaus until it is a month past the due date.
For example, you could pay the mortgage with plastic on the 14th to give yourself approximately 25 more days to make the payment. If the payment processor fee is less than the late fee assessed by your lender and you pay off the entire balance on your credit card by the due date, you might come out ahead. If you don’t, depending on how long it takes you to pay back what you owe, you can find yourself in a worse financial situation due to paying interest.
Do Credit Card Mortgage Payments Affect Your Credit Utilization Ratio?
The impact of credit card mortgage payments on the utilization ratio (the proportion of the credit line that is used when the statement is generated) is another thing to take into account. Credit utilization makes up about 30% of your credit score, according to FICO, which produces the credit scores that the majority of significant lenders use.
You must pay off the amount before the statement is even issued if you don’t want the fact that you pay the mortgage with a credit card to have an impact on your credit score. That said, don’t worry about paying your amount in full before your statement arrives if you have a high credit line and just use a little portion of it.
What Are the Pros and Cons of Paying the Mortgage With a Credit Card
When all is said and done, there are some pros but also cons that come with paying your mortgage with a credit card. To make it easier for you to see the whole picture, we made a table showing both.
| Pros | Cons |
|---|---|
| You can earn rewards | You can delay and avoid late payments |
| You will need a workaround | It can worsen your financial status |
Frequently Asked Questions
When buying real estate, you’ve certainly gone over things like how much credit history you need for a mortgage to all the ways you can finance a down payment. Having all the information about how long does the mortgage approval take certainly made the process easier and faster. That’s why to keep you in the loop of the information, check out frequently asked questions about paying a mortgage with a credit card, and you won’t be surprised by any benefits and downfalls of this action.
When Does It Make the Most Sense to Charge the Mortgage Payment to the Credit Card?
The answer here is pretty simple – when the value of any rewards exceeds the price of the transaction convenience fee, it may make sense to charge your mortgage payment to a credit card.
Is There a Downside to Using Credit Cards to Pay off the Mortgage?
The convenience charge is the immediate drawback of paying your mortgage with plastic. Another sometimes disregarded problem is that using plastic to pay for your mortgage might significantly increase your credit use and impact your credit score. Most importantly, interest rates on credit cards are typically higher than those on mortgages.
The Bottom Line Is You Can Pay the Mortgage With a Card
Make sure you are aware of the cost structures and all the additional work required before deciding to pay your mortgage with a credit card. In general, you should only choose this course of action if you have enough cash on hand to pay off your credit card in full. Additionally, you should only use plastic to pay for your mortgage if the fees are far lower than the advantage you receive in return.
Also, think about where your energy can be better used. Paying your mortgage using a credit card is only one of many opportunities to get more rewards over time. We advise determining whether you can pay your other expenses without incurring any additional costs.
In the end, using a credit card to pay for your mortgage may make sense, but don’t discount the various methods you might rack up points. You could be earning points and miles for years to come with some innovative thinking and a few welcome bonuses.
