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Mortgages

Can You Pay Your Mortgage With a Credit Card?

Many people wonder whether they can successfully pay large monthly bills, such as their mortgage, using a credit card. There are a few 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 extra rewards or miles.

Whatever your motivation for wanting to pay your mortgage 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 directly with a credit card, but there are ways around this. Indeed, almost anyone can pay their mortgage with a credit card — the most important question is whether you should.

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Can I Pay My Mortgage with a Credit Card?

The short answer is yes, you usually can. Whether it’s a good idea or not, however, is another matter entirely. There are a few situations in which you might want to use a credit card to make your mortgage payment, but there are a number of nuances as well, and you’ll need to be familiar with them before you do so.

When You Don’t Have the Cash

You might run into a situation in which you simply don’t have the funds in your bank account to make your mortgage payment. If you find yourself here, you might be looking at your Mastercard, Visa, American Express, or Discover credit card and wondering if you can pay your mortgage with it.

Of course, the first hurdle is you’ll 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 you have the credit available, you’ll first want to check with your mortgage lender or servicer to see if they allow their customers to pay by card directly. Many servicers no longer allow this.

If your servicer lets you pay with a credit card, then you’ll be able to make a payment without using a middleman-type company. Even if they don’t, however, you might still be able to do it—you’ll just need to get a bit more creative.

Alternative Ways to Pay with a 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 they have one, you can use your credit card to pay through that service.

If not, your last hope will be third-party companies that charge a service fee, such as Plastiq. Plastiq charges a 2.50% transaction fee. That will be in addition to any interest you end up paying 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 of interest on your credit card bill.

Should You Just Accept an Overdraft Fee?

If you have most of the money needed for your mortgage payment and are only short by a small amount, it might be less risky to pay an overdraft charge once than to float your entire mortgage payment on an interest-bearing credit card account. Some servicers have programs to help struggling homeowners make their payments, too. Check with your own servicer to see if they offer a better option than paying by credit card.

When You Want to Maximize Your Rewards Points

If you have a rewards credit card, it can make paying your mortgage that way a very tempting proposition. 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 to a landlord for rent 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 service (the “middleman”) that will accept credit card payments on your servicer’s behalf will likely charge you more in transaction fees then you’d make in credit card rewards.

What If You Have a New Card with a Big Sign-up Bonus?

There’s one situation in which you might come out ahead, and that’s if a new credit card offers you bonus points, such as a large number of airline miles if you spend a certain amount in the first 90 days after account opening.

When in doubt, do the math to see if you’ll make money or lose money.

It bears noting that if you can’t pay off your credit card balance before interest charges accrue, you’ll almost certainly be worse off financially than if you just paid your mortgage in cash. If your rewards depend on specific spending categories, call your credit card company ahead of time to see if what you have in mind will count toward rewards.

What are the Benefits of Paying My Mortgage with a Credit Card?

There are a few benefits, but not as many as you might think.

  • Being able to keep your mortgage current during a financially tight month
  • Reaping extra benefits from rewards points on your card
  • Paying the balance off right away can help build your credit

What Are the Risks of Paying My Mortgage with a Credit Card?

  • Most mortgage companies won’t accept payment by credit card, which means you could incur other fees trying to go through a payment service.
  • If you can’t pay off the balance right away, you risk putting yourself into a downward financial spiral.
  • Not only were you paying interest on your mortgage, but now you’ll potentially be paying added interest on the mortgage payment itself.
  • You can just as easily build your credit by simply making your mortgage payment in a traditional manner.
  • Your credit utilization could go up, which could damage your credit report and make your credit score go down temporarily.

Alternatives to Paying Your Mortgage with a Credit Card

If you simply don’t have the cash to pay your mortgage this month, there are a few options besides using your credit card. Not all of them, however, are smart moves.

Personal Loans

A personal loan can be an option for those looking for quick funding.

There are many online personal loan companies and it is important that you compare your options to receive the best terms. If you are time dependent, check the average time to fund at each lender to see which company fits your time frame.

>> Read More: Best personal loans

Restructuring Your Mortgage

If you’re having a problem scraping together the money to pay your mortgage each month, you may benefit from a restructuring of your loan. Unlike a refinance, a loan restructure is specifically for those who want to keep their home but can’t handle the current payments.

It’s a government program called the Home Affordable Modification Program, or HAMP, and in order to qualify, you’ll need to have sufficient, stable income to cover the payment you and the lender agree upon. You’ll also have to provide tax statements, pay stubs, and proof of why you need a restructure (e.g. illness or death of the home’s primary wage earner, a temporary unemployment situation, etc.).

Bottom Line

It’s common for many to experience temporary financial hardship, but reaching for a credit card to pay your mortgage might not be the best idea. Explore other options, even if it means asking family and friends for help. If all you have is your credit card, however, then make sure you get the balance paid off as quickly as possible.

>> Read More: Should You Pay Off Your Mortgage Early?