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Can You Pay Your Mortgage Using a Credit Card? Technically, Yes… but Should You?
If you’re curious about whether you can pay your mortgage using a credit card, it’s probably for one of two reasons:
- You want to capitalize on perks offered by your credit card company, like cash back, points, or travel incentives.
- You’re tight on cash and need a way to pay your mortgage.
Either way, while there may be some exceptions, it’s not something most mortgage companies allow for a number of potential reasons, such as:
- Transaction Costs: Credit card transactions typically incur fees for the merchant. Mortgage companies, which often deal with large sums of money, would face significant transaction costs if they allowed credit card payments. These fees can eat into their profits or be passed on to the customer.
- Risk and Chargebacks: Credit card transactions can be reversed through chargebacks, especially in the case of disputes or fraud. Mortgages involve long-term, substantial amounts of money, and the potential for chargebacks creates a level of risk that mortgage companies may prefer to avoid.
- Credit Limit Issues: Mortgages are usually substantial sums, and credit card limits may not be sufficient to cover the payment if the borrower makes other purchases before their payment clears.
- Regulatory Compliance: Mortgage transactions are subject to various regulations, and the use of credit cards for such payments may involve additional complexities and regulatory considerations.
But if you were really hoping to find a way to pay your mortgage with a credit card, a recent Yahoo Finance article reports that you can use a third-party payment service (Plastiq) to do so. However, you’ll need a credit card from the Discover or Mastercard networks, and you’ll have to pay the service a 2.9% fee — which could get pricey depending upon how much your mortgage is — and a “delivery fee” which varies from one lender to the next.
If you’re going after credit card perks, perhaps those fees are worth it. But if money is already tight, those fees could make matters worse.
Potential Pitfalls Of Using Credit Card
Whether you’re considering this approach because of monetary issues, or flush with cash and just to work the system to gain some financial rewards, there are a few things you should consider before using your credit card to pay your mortgage. While we mentioned the additional fees you’ll have to pay above, here are a few other things that could cost you in different ways:
- You may be paying a higher interest rate than your mortgage rate. If you have a 0% interest card, or just a rate that’s lower than your current mortgage interest rate, it could make sense. Of course you’ll need to make sure you pay off the balance before interest accrues, otherwise you’re paying interest twice on that one mortgage payment — once on the mortgage and a second time on the credit card payment. But if the rate on your credit card is higher than your mortgage rate, you definitely want to avoid doing this if possible.
- It could impact your credit limits. If your credit card company feels you might be in financial trouble — which paying your mortgage with their card may indicate — they could decide to freeze or even lower your credit limit.
- It could also hurt your credit score. Using a significant portion of your credit limit to pay your mortgage could impact your credit utilization ratio. High credit utilization can negatively affect your credit score.
- It could snowball into more debt than you can handle. While it may get you enough points to take a trip, or help you avoid not being able to pay your mortgage when times are tight, if you aren’t paying off your credit card balance at the end of the month it can easily start accumulating to a point where it’s difficult to even make interest-only payments on your credit card each month… or worse.
Relying on credit cards to cover essential expenses like mortgage payments can lead to a cycle of debt accumulation, making it challenging to break free from financial difficulties. It may be a short-term solution, but it doesn’t address the underlying financial issues. It’s important to consider more sustainable financial strategies.
If you’re facing a potential late payment on your mortgage, can’t pay it at all, or just see that becoming a near possibility in the near future, here are a few things you should consider doing, rather than using your credit card to pay your mortgage:
- Establish whether this is a short-term issue, or a bigger, long-term problem. If it’s a matter of waiting on money you know for sure is coming in shortly, then bridging the gap by using your credit card may be the right move. But if you lost a job, got hit with unexpected bills or emergencies, or just let your finances get out of control and there’s no quick fix, using a credit card will only add to your issues and push it down the road a bit.
- Do you have any other options you can use? If you’ve been stashing some money away for a rainy day, it might be the time to whip out the umbrella. Or, perhaps family or friends could lend you the money you need.
- If it’s a short-term problem… talk to your lender. If you can’t find a way to come up with the money any other way, and you know it’s just a short-term problem, let your lender know what’s going on. They may be willing and able to help you get through the rough time.
- If it’s long term… talk to a real estate agent. If it looks like you wont be able to handle your mortgage payments on an ongoing basis, talk to your real estate agent before you get into too big of a financial hole. The earlier you address it, the more likely he or she can help you sell your house and find you a home to buy or rent that’s within your budget. If you wait too long, it could impact your ability to get a different mortgage, or even get approved by a landlord.
The Takeaway:
Using a credit card to pay your mortgage isn’t typically allowed by lenders, but there’s a third-party service that allows you to do so.
It may make sense to do it if you’re simply trying to game the system to rack up some credit card rewards with a large transaction, and are good about paying off the balance each month. Just be aware that it could still have some negative impacts on your credit, and cost you some fees that may or may not be worth incurring.
However, if you’re using this method because your finances are not in good shape, this may make matters worse for you. Assess whether this is an attempt to remedy a short-term or long-term problem. If it’s short-term, try and find other means to make your monthly payment and/or speak with your lender. If it’s long-term, speak with your real estate agent to come up with a solution to find a new home within your budget before your finances and credit score are in worse shape.
