Can I Pay My Mortgage with a Credit Card?

Do you need to pay your mortgage with a bank card? It is likely to be doable, however it can in all probability price you. How do you do it? What’s the associated fee? And when is it worthwhile? This text will reply all your questions on charging your month-to-month mortgage cost.

Why Pay Your Mortgage with a Credit score Card?

There are 4 the reason why somebody would possibly take into account making their month-to-month mortgage cost with a bank card: 

1. To earn bank card rewards
2. To hold onto their money and financial institution a few further weeks’ price of curiosity
3. To purchase a few further weeks to pay the mortgage with out making a late cost to the mortgage firm
4. To keep away from foreclosures in any respect prices

These are all legitimate causes to pay your mortgage with a bank card. The primary three of those causes would possibly provide you with a slight monetary edge in the long term. The fourth may very well be extremely damaging. We’ll have a look at every possibility in additional element beneath, however first, let’s discover the logistics of paying your mortgage with a bank card.

Third-Occasion Fee Providers

Many collectors, together with mortgage lenders, is not going to settle for bank cards to repay debt. For one, the establishment could face a transaction charge from the bank card firm. However extra considerably, they know that doing so would imply letting prospects commerce one type of debt—a comparatively low-interest and typically tax-deductible type—for one more with greater curiosity and no tax deduction. Politicians, regulators, and the information media would have a discipline day decrying such a apply.

Enter third-party cost processors. These firms will allow you to use a bank card to pay nearly any entity. Whereas the aggressive panorama is all the time evolving, the best-known—and seemingly solely—participant that processes mortgage funds is Plastiq, which costs a 2.85% transaction charge. You would possibly be capable to discover a referral code on-line that provides you a couple of hundred {dollars} in fee-free transactions, however that may solely get you to date—except you discover a approach to earn extra free transactions by referring others your self.

Paying your mortgage with a bank card has some restrictions, even with Plastiq. The phrases and situations prohibit you from utilizing a Visa or American Categorical card to pay your mortgage via Plastiq. Contemplating that different cost processors have come and gone previously, Plastiq is probably not round eternally, or it could not all the time be an possibility for making mortgage funds. Mastercard and Uncover may cease permitting mortgage funds via the service altogether. Conversely, extra choices may turn into obtainable sooner or later to pay your mortgage with a bank card, maybe with more-competitive charges or new perks.

Ought to You Pay Your Mortgage with a Credit score Card?

Let’s stroll via every of the 4 the reason why you would possibly need to pay your mortgage with a bank card and see whether or not they’re good concepts or not.

To Earn Rewards

Bank cards have two most important forms of rewards: sign-up bonuses and ongoing rewards. An indication-up bonus would possibly provide you with $300 money again for spending $3,000 in your first three months as a cardholder. Ongoing rewards would possibly provide you with 2% again on each buy, together with the purchases you make to earn the sign-up bonus.

Let’s say your mortgage cost is $1,000. If you happen to incur a 2.85% charge to make that cost, you’re shedding $28.50. Nonetheless, you would possibly be capable to come out forward in one in every of these situations:

• Your bank card gives ongoing money again (or the equal in factors or miles) of three.0% or extra on this cost.
• Your bank card firm doesn’t categorize the third-party cost processor’s cost as a money advance. Money advances usually incur charges and all the time start accruing curiosity instantly, with a median rate of interest round 25% in 2022. Verify your bank card settlement to seek out out your card’s money advance guidelines. Even when every thing seems good, you might need to make a small check buy via the cost processor earlier than making your full mortgage cost to confirm that your transaction might be handled as a purchase order.
• You’ll earn a sign-up bonus price greater than the processing charge, and also you wouldn’t be capable to earn the sign-up bonus via your common spending. This is likely to be essentially the most compelling cause to pay your mortgage a couple of times with a bank card.
• You’ll earn another bank card profit from the acquisition that’s price greater than the charge, and also you wouldn’t be capable to earn this profit via your common spending. Advantages that you just is likely to be making an attempt to earn embody airline standing, lodge standing, a free lodge evening, or a free airline ticket for a companion.

To Earn Curiosity

If you happen to don’t carry a bank card steadiness, you get an interest-free grace interval in your purchases. This era lasts round 21 to 25 days beginning when your bank card assertion is issued and ending when your cost is due.

Over the course of a 12 months, profiting from this grace interval by conserving your money in financial savings—the place it earns curiosity—till your bank card due date would possibly earn you a couple of further bucks. It’s not a foul factor to do with purchases that you just had been going to make anyway, so long as you by no means make a late cost or carry a steadiness.

The very best high-interest financial savings accounts in 2022 solely pay 0.7% curiosity yearly, nevertheless. Twenty-five further days of curiosity in your mortgage cost at that fee will not put you out forward after a 2.85% cost processing charge.

To Keep away from a Late Fee

Your mortgage cost is normally due on the primary of the month. Nevertheless, many lenders give debtors till the fifteenth to make their cost with no late charge. As soon as this grace interval ends, lenders impose hefty late costs (verify your assertion to see how a lot), however a late cost received’t really be reported to the credit score bureaus till it’s 30 days late.

If you happen to want greater than the 15-day grace interval to pay your mortgage however need to keep away from a late charge and credit score rating injury, you might pay your mortgage with a bank card on the 14th to purchase your self about 25 extra days to make your mortgage cost, assuming you are not carrying a steadiness in your card.

You possibly can come out forward if the cost processor’s charge is lower than your lender’s late charge and if you happen to repay your bank card steadiness in full by the due date. If you happen to don’t, you might find yourself in worse monetary circumstances by paying bank card curiosity, relying on how lengthy it takes you to repay what you owe.

To Keep away from Foreclosures

An extension of the concept above is to pay your mortgage with a bank card to keep away from foreclosures. It’s comprehensible to need to do something doable to stay in your house. However, if you happen to’re to date behind in your mortgage funds that you just’re dealing with foreclosures—a course of that your lender can’t provoke till anyplace from three to 6 months after your late cost, relying on the state the place you reside—your monetary circumstances are in all probability so tenuous that including bank card debt to your issues is just not in your finest curiosity. Speaking to your lender and a housing counselor a couple of plan to keep away from foreclosures, maybe via a mortgage modification, might be a greater thought.

Last Tip: Take into account Your Credit score Utilization

One other issue to think about is the impact of bank card mortgage funds in your credit score utilization ratio, the share of your credit score line that you just’re utilizing when your assertion is issued. In accordance with FICO, which generates the credit score scores that almost all main lenders use, credit score utilization accounts for 30% of your credit score rating. If you happen to don’t need the truth that you’re paying your mortgage by way of bank card to have an effect on your credit score rating, you have to to repay your steadiness earlier than your assertion is even issued—not simply earlier than your assertion due date.

That mentioned, in case you have a excessive credit score line and solely use a minuscule share of it—say, lower than 10%—then you definitely don’t want to fret about paying your steadiness earlier than your assertion comes out. Such a low credit score utilization ratio is unlikely to hurt your rating.

An Instance of Paying Your Mortgage with a Credit score Card

After studying a headline like “How We Earned $2,000 in Credit score Card Rewards Paying Off Our Mortgage,” who wouldn’t need to pay their mortgage with a bank card? It’s a real story that private finance blogger Holly Johnson pulled off—and she or he used the rewards to assist fund a Mediterranean cruise for her household of 4.

Nevertheless, she was solely capable of obtain it as a result of her platform as a high-profile blogger allowed her to earn hundreds of {dollars} in free Plastiq transactions by referring her readers to the service. Most of us can’t do this.

Nonetheless, in case you have glorious credit score, you will discover many alternatives to earn substantial bank card sign-up bonuses. All it’s a must to do is spend a specific amount inside three months of being authorized for the cardboard.

The Backside Line

Solely beneath restricted circumstances will the typical individual probably profit from charging mortgage funds to a bank card. First, you’ll have to discover a third-party cost processor that permits you to use your bank card to pay your mortgage firm. Second, you’ll have to earn bank card rewards that exceed the cost processing charge. Third, you’ll have to pay your bank card steadiness in full, ideally even earlier than your assertion is issued, to keep away from paying curiosity and probably hurting your credit score rating. If you are able to do all of this stuff, then paying your mortgage with a bank card would possibly repay.