Options dwindle for paying mortgage, car loan on credit

Holy Grail of points accumulation harder; card issuers crack down on manufactured spending


Cashing In
Cashing In columnist Tony Mecia
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for

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Question Dear Cashing In,
Is there a way to pay off auto loans and mortgages that can accumulate points? -- Bixby

Answer Dear Bixby,
This idea is the Holy Grail of points accumulation. If you could pay off your biggest debts using a points-earning credit card, you could earn a lot of points.

You would essentially be shifting debt from accounts that earn no rewards, such as auto loans and mortgages, to accounts that do earn you rewards. If you could do that, imagine the possibilities: You could basically transfer those monthly debt payments to a 2 percent back cash-back card and effectively knock 2 percent off the interest rates on those loans. That would be a neat trick.

Then you could get a second rewards card and use it to pay off the first card. And you could go back and forth, paying off the same debt multiple times with two different cards, racking up points and laughing all the way to the bank.

Unfortunately, this points-collecting dream is not possible. Generally, you cannot use credit cards to pay an auto loan or mortgage directly. In those rare instances where you can, you will typically be charged a convenience fee that will exceed the benefit of placing the payment on a credit card.

There are also a lot of companies that will accept payments by credit card then turn around and pay your mortgage, auto loan or other bill, but these, too, usually charge a fee. For instance, there is a service called ChargeSmart that accepts credit cards then pays your bills, but it charges a fee of 2 to 3 percent, depending on the amount of the bill. That fee will negate any reward you might earn on your credit card, although using such a service might be useful if you need to meet minimum spending requirements to receive a sign-up bonus or you were barely short of enough miles or points to receive a reward.

Sometimes, you will find stores where you can buy prepaid gift cards using credit cards. This is essentially buying cash using credit, which gets you halfway toward paying those mortgage or car bills.

The problem, though, is that the methods of converting those gift cards into bill payments are drying up. Until last year, for instance, some bloggers reported success loading the Target REDCard, which offers a bill-pay feature, using a gift card for no fees at Target.

American Express also offers a service call Bluebird, which can be loaded for no fee using certain gift cards at Walmart stores. In January 2016, though, American Express cracked down on the accounts of many people who regularly loaded their Bluebird cards with gift cards then paid bills with the money, by disallowing any additional loading of money onto the cards.

Many stores still allow you to buy money orders using gift cards for a small fee. But this approach can be very risky, because depositing money orders into your bank account can appear to banks as though you are laundering money, and they might close your bank account.

As you can see, this quickly becomes complicated. It is called "manufactured spending," should you wish to research it more on the Internet. I consider it to be an advanced technique that is too complex and time-consuming for most people.

Most of us will have to be content with earning points the old-fashioned way: by charging actual expenses.

See related: Pros, cons of paying taxes with credit card,  What else can I buy to boost my reward points?, Using prepaid cards to boost rewards

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Published: March 8, 2016

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