Knowing how to pay your mortgage with a credit card can help you if you’re in a financial pinch.
While not ideal, paying your mortgage with a credit card is possible, but you may have to go through a separate payment service to make it happen.
- Many mortgage companies will not allow you to make a mortgage payment with a credit card; likewise, many credit card companies do not permit users to pay their mortgages with their cards.
- There are payment services that can let you get around these restrictions by charging your credit card and sending a check for your mortgage payment to your mortgage company.
- The fees incurred using these payment services are generally greater than the value of any rewards you could earn using a credit card.
Is it possible to pay your mortgage with a credit card?
If you’ve tried to use a credit card to pay your mortgage in the past, you know it’s no easy task.
You may think that since it’s your credit card and your mortgage payment, using a credit card to rack up points or when you are short on funds would be allowed, but both the credit card companies and banks typically discourage these types of transactions.
The reason is that these are considered debt-to-debt transactions, where you use one form of debt to pay another. They are riskier for both companies, so there are safeguards in place to protect their investments.
Typically, whether you can make a mortgage payment with a credit card depends on multiple factors, such as your mortgage lender, your card’s terms, and the network you use – Discover, American Express, Mastercard, or Visa.
However, there are third-party services that provide a way to make these payments, but they charge a steep fee and may not be right for everyone.
Should you use a credit card to pay your mortgage?
Using your credit card to pay your mortgage should be your last option.
Debt-for-debt payments often result in further money problems since you not only pay fees for the transaction but you accumulate interest on your growing credit card balance.
Before you go this route, consider the following:
- Do the credit card rewards outweigh the transaction fee?
- Are you close to your credit limit?
- Are you struggling to pay your bills for the month?
- Will it lower your credit score?
- Can you pay off your credit card balance next month?
Paying your mortgage shouldn’t result in additional debt, so be sure to consider all factors before making the decision.
Obstacles that keep you from using your credit card to pay your mortgage
Using a credit card to pay your mortgage isn’t a solid debt relief strategy and is a decision you shouldn’t take lightly. Because of the dangers, the credit card company, mortgage lender, and the card network don’t make it easy.
Some card networks like MasterCard and Visa allow these transactions, but many issuing banks don’t. So, while you may have a Visa or Mastercard, if a bank like Bank of America issues your credit card, you’re out of luck.
Finally, even if your card network and bank allow you to make the payment, if your mortgage company doesn’t accept credit card payments, you won’t be able to complete the transaction.
Factors to keep in mind before using a credit card to pay your mortgage
Using a credit card to make a mortgage payment is a big decision you shouldn’t take lightly. There are many factors you need to consider before you pursue this type of transaction.
Even if you find a third-party company that will allow you to make the payment, the downsides may outweigh the rewards. Consider these factors before making your decision.
The impact on your credit score
A mortgage payment will most likely take up a significant amount of your credit card balance, which could mean trouble for your credit score. The higher your credit utilization ratio, the more negative effect it has on your score.
Ideally, you should maintain a 30% or lower credit utilization ratio. Any higher, and your score will begin to go down. Adding a large mortgage payment, which can be thousands of dollars, is a sure way to skyrocket your balance and decrease your overall credit score.
For example, if you have a $10,000 limit on your card with a balance of $3,000 and you add a $2,500 mortgage payment, your credit utilization now exceeds 50%. The more you use your card, the higher that percentage goes.
The closer you get to your limit, the greater the impact on your credit score.
Interest fees are a costly part of holding debt, and using your credit card to pay your mortgage only exacerbates your overall expenditures. You already pay interest on your mortgage, but when you use your card to pay it, you’re now adding interest on the payment itself.
If you’re unable to pay the full balance on your card the following month, you will continue to have interest charges for the entire length you hold the balance. That means you may pay interest on your mortgage payment for months, if not years, to come.
Rewards vs. fees
If your credit card offers rewards for purchases, it can be tempting to want to maximize these benefits by using it to pay all of your bills. However, the fees accompanying these transactions usually outweigh any reward benefits you may receive.
For example, if your mortgage payment is $2,500 and the third-party company charges a processing fee of 2.8%, you’re paying $70 per transaction. While credit card rewards vary, finding a company that offers rewards exceeding this amount is rare.
There is one exception to consider with this scenario. Some cards provide a sign-up bonus if you spend a certain amount in a specific time period. Putting a large mortgage payment onto your card could help you meet this requirement, and the lavish bonus could exceed the third-party fees.
While for this specific scenario, using your credit card to make a mortgage payment makes sense, you would still have to pay off the balance completely the following month to avoid additional interest charges.
Final thoughts on paying your mortgage with a credit card
Knowing how to pay your mortgage with a credit card can be helpful in a pinch, but you should always consider all factors before making this serious financial decision.
If access to funds to pay your mortgage each month has become difficult or if your debt load has become too high, it’s important to know that there are other solutions available.
At Americor, we understand the importance of managing your finances wisely.
As America’s trusted source for debt relief solutions, we aim to empower you with financial knowledge that can lead to informed decisions, whether it’s about savings, investments, or managing debt.
If your debt has become unmanageable and you have difficulty making your debt payments each month, then you should consider a free consultation call with one of our certified Debt Consultants, who can provide personalized advice tailored to your specific needs.
By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future.
Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.
For more information on Americor’s debt relief services, contact us today to see how we can help you eliminate your debts, and get on the fast-track to becoming completely debt-free!