Paying your mortgage with a credit card requires a few extra steps. Most mortgage lenders don’t allow this because “it means paying debt with debt — a practice that increases financial risk,” says Melissa Caro, certified financial planner and founder of My Retirement Network, a website that provides retirement resources.
However, there are a few indirect ways to pay your mortgage with a credit card, such as using a third-party payment platform. This option is cheaper than other methods but still requires paying a small fee. That said, the benefits of paying with a card might outweigh the costs in a few scenarios.
[Read: Best Credit Cards.]
Ways You Can Pay Your Mortgage With a Credit Card
While lenders don’t allow direct credit card payments, you can use a few indirect methods to pay your mortgage with a credit card.
[Read: Best Cash Back Credit Cards.]
Third-Party Payment Services
Some third-party payment platforms allow consumers to make mortgage payments with certain credit card issuers. For example, if you have a Mastercard or Discover credit card, you can pay your mortgage via Plastiq — a payment platform that lets people pay bills with either a debit or credit card, regardless of whether the vendor accepts those payment methods — in exchange for a 2.9% fee. Plastiq cannot process mortgage payments from American Express, Capital One and Visa credit cards, according to a representative.
Pros
— Rewards. You can earn rewards in the form of cash back or points to redeem for travel and other types of expenses.
— Sign-up bonus. Putting such a large expense on a credit card could help you earn a large sign-up bonus.
Cons
— Fees. A third-party service like Plastiq often charges transaction fees.
— Potential interest. If you don’t pay your credit card balance in full before the payment due date, you may have to pay interest charges.
— Credit card restrictions. You can’t use an American Express, Capital One or Visa card to pay a mortgage with Plastiq.
[Read: Best Rewards Credit Cards.]
Cash Advance
Many credit card issuers offer cash advances, which allow you to borrow a percentage of your total credit limit. You can withdraw cash advance funds at an ATM or by using a convenience check. Afterward, you can use the money to pay your mortgage.
Pros
— Emergency use. If you’re facing a financial emergency and can’t make a mortgage payment, you could gain immediate access to the cash you need. Although this may not make sense financially, it could act as a temporary bridge in these situations.
— No credit check. Credit card companies don’t require credit checks for cash advances.
Cons
— Fees. Credit card companies charge up to a 5% fee on the cash advance amount. For example, if you took out a cash advance of $2,000 to cover your mortgage payment, you’d pay up to $100 in advance fees.
— No reward points. Unlike other ways of paying your mortgage with a credit card, cash advances don’t count toward earning credit card rewards.
— High interest rate. Credit card issuers often charge higher annual percentage rates for cash advances compared with purchases.
— No grace period. Also, unlike regular purchases on a credit card, interest on cash advances starts to accrue immediately.
[Read: Best Sign-up Bonus Credit Cards.]
When Does It Make Sense to Pay Your Mortgage With a Credit Card?
Paying your mortgage with a credit card could be a wise move when the credit card rewards you earn outweigh the fees. “If you were just approved for a new credit card with a large sign-up bonus with a high spend requirement, this can be a way to earn the bonus,” says Rupeng Liao, a lead consultant for Comscore, a global media measurement and analytics company.
However, Liao says you should do this responsibly. This means paying your credit card bill in full before the statement is due to avoid interest and late fees.
Downsides of Paying Your Mortgage With a Credit Card
Before paying your mortgage with a credit card, consider the risks.
— Possible harm to your credit score. “Mortgage payments are typically large, which means putting them on a credit card would significantly increase your credit utilization ratio,” says Caro.
— Potentially high borrowing costs. If you make a late credit card payment, you’ll likely have to pay a high interest rate and late fees.
[Calculate: Use Our Free Mortgage Calculator to Estimate Your Monthly Payments.]
The Bottom Line
Although there are a few ways to pay a mortgage with a credit card, the fees and risks tend to outweigh the rewards. That said, using a credit card to make your monthly payments could make sense if it helps you secure a huge sign-on bonus. If you decide to pay your mortgage this way, review your finances to ensure you can pay off the credit card in full before the statement date to avoid interest charges.
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Can You Use a Credit Card to Pay Your Mortgage? originally appeared on usnews.com
