Can you Pay Your Mortgage with a Credit Card?
- January 11, 2017
- Posted by: Jeff Gitlen
- Category: Personal Finance
Many people wonder whether they can successfully pay large monthly bills, such as their mortgage payment, using a credit card. There are a couple of different reasons someone might like to pay their mortgage with a credit card. Perhaps it’s a tight month financially and the money just isn’t available, or perhaps they are looking for ways to rack up rewards points on their card. Whatever your motivation for wanting to pay with a credit card, this article will give you a quick overview of how to go about doing so. Many mortgage servicers will not allow you to pay your mortgage payment directly with a credit card, but there are ways around this. Almost anyone can, indeed, pay with a credit card. The most important question is whether you really should, and this article will help you answer that.
Paying With a Credit Card Because You Don't Have Cash Available
The first reason to consider paying your mortgage with a credit card is because you don’t have enough funds in your savings or checking account to make your monthly payment. Of course, the first hurdle is that you will need to have a credit limit higher than your mortgage payment. Then, you’ll need to have enough available credit on your card to make the payment. Assuming that you have the credit available, you’ll first want to check with your mortgage servicer to see if they allow their customers to pay by card directly. Many servicers no longer allow this.
If your servicer does, then you’ll be able to make a payment without using a middleman-type company. However, if your servicer is one of the many who don’t allow credit card payments, you might still be able to pay indirectly using your credit card. Check with your credit card issuer to see if they offer a bill pay service that is compatible with your mortgage servicer.
If not, your last hope will be third-party companies that charge a service fee. Those can be found online, but beware, because their fees are often 2-3% of your payment. That will be in addition to any interest you pay to your credit card issuer. One last word of warning: it’s easy to get a month behind this way and end up paying a whole lot in interest on your credit card.
If you have most of the money needed for your mortgage payment, it might be less risk to pay an overdraft charge once than to float your entire mortgage payment on an interest-charging credit card. And some servicers have programs to help struggling borrowers make their payments. Check with your own servicer to see if they offer a better option than paying by credit card.
Paying With a Credit Card to Maximize Rewards Points
The second reason to consider paying by credit card is to maximize credit card rewards points. In fact, this might be the most tempting reason to pay by credit card. At first glance, it seems like a great idea. Just make your monthly mortgage payment using a rewards card, rack up points, then pay off the card bill before interest accrues. Unfortunately, as mentioned above, most mortgage servicers these days aren’t allowing customers to directly pay with a credit card. This type of activity – making large, monthly payments on a mortgage or auto loan using a rewards card – is referred to as “manufactured spending.” Credit card companies frown on this, and many mortgage companies are also credit card companies. So, it’s increasingly difficult for customers to pull this off, but you can always check directly with your servicer to find out if it’s allowed.
If your servicer does not allow direct payments, then you probably don’t want to use your credit card to pay indirectly unless the rewards you stand to accumulate are truly outstanding. That’s because the third-party companies (the “middlemen”) that will accept credit card payments then turn around and pay your servicer are likely going to charge you more in service fees then you’ll make in credit rewards. However, there may be some instances, such as big rewards bonuses for newly opened cards, where you’ll actually come out ahead. When in doubt, do the math to see if you’ll make money or lose money. Just keep in mind that if you can’t pay off your credit card bill before interest accrues you’ll almost certainly be worse off financially than if you just paid your mortgage in cash. And if your rewards depend on the category of spending, call your credit card company ahead of time to check on whether what you have in mind will count toward rewards.