The rules imposed by lenders, credit card networks and issuers may make it hard to find a way to pay your mortgage with a credit card. But even if this option is available to you, there’s a lot to consider before reaching for your plastic.
Paying your mortgage with a credit card may seem like a good option for different reasons. Perhaps, you may feel that it’s your only solution to avoid being late on your mortgage. Or it may look like a great way to earn rewards on your credit card.
However, there are many nuances and obstacles to paying your mortgage with a credit card. Read on to find out whether it’s possible for you and which alternatives you can consider.
How to pay your mortgage with a credit card
Whether you can pay your mortgage with your credit card can take some figuring out. For it to be an option, your credit card network and issuer, as well as your mortgage lender, have to allow it. And even if this best-case scenario does happen, you might be charged costly fees.
See related: How to pay rent with a credit card
“Unfortunately, not all providers will agree to do this,” John Davis, finance expert and education ambassador at ScoreSense, explains. “American Express and Visa won’t do this. Discover or Mastercard may allow it, but only if you go through a payment processing service.”
In a nutshell, there are two primary ways you can pay your mortgage with a credit card, assuming your issuer allows it – though processing service Plastiq or by taking out a cash advance.
Pay with Plastiq
The payment processing service Plastiq allows users to pay their mortgage with a credit card for a 2.5% fee. This may be helpful in a financial pinch, but it can get expensive quickly if you use the service more than once. For example, with an average mortgage payment of $1,500, you’d have to pay $37.50 in fees.
Additionally, if you’re looking to earn rewards by charging your mortgage on a credit card, your card’s rewards rate needs to be truly generous to make it worth the fee. To find such a card can prove to be a challenge. Even the best flat rate credit cards average 1.5% to 2% cash back on all purchases, meaning you’re losing more than you earn in rewards to Plastiq’s fee.
Also, keep in mind that Plastiq isn’t a workaround to pay your mortgage with any card. Russell Nauta, product and editorial lead at Credit Card Reviews, has been paying his mortgage with a credit card for almost five years through Plastiq. However, there have been a few hiccups along the way due to policy changes from issuers.
“Initially I was using The Platinum Card® from American Express to do so until their policy changed,” he shares. “At that point, I moved to my Chase Sapphire Preferred® Card as they were still allowing mortgage payments with the service, until about eight months ago when their policy changed where the charges became classified as cash advances, and triggered cash advance fees as well as the cash advance APR … The resulting fee structure made it not even remotely cost-effective or worthwhile.”
Now Russell is using a Citi card because it doesn’t have the same restrictions. Even though he doesn’t get the same value because of how he’s choosing to redeem his points, he’s still able to earn rewards that outweigh the fees.
“That’s the reason to do it and the only way it makes sense,” he says. “If your points earning and redemption method value is greater than the fees charged, there is no reason not to do it.”
Get a cash advance
If your credit card network doesn’t work with Plastiq, there still might be a way for you to use your credit line to pay for your mortgage.
“Major competitors to Plastiq have been bought out, shut down or discontinued,” says Leslie Tayne, debt resolution attorney and founder of Tayne Law Group. “Though it won’t earn rewards or help individuals reach minimum spending requirements for bonuses, convenience checks and balance transfers that offer funds deposited into the cardholder’s bank account can be alternatives to Plastiq.”
However, if you’re looking into these options, it’s crucial to be aware of the costs. For instance, if you decide to pay your rent with the help of a convenience check, make sure you know your card’s cash advance fee and APR. These interest rates are typically higher than your regular APR and can even exceed 30%.
What to consider before you pay your mortgage with a credit card
When you’ve found a way to charge your mortgage on a credit card, consider potential consequences before doing so.
Paying your mortgage with plastic can get extremely expensive, and it is not only because of the fees. Putting your mortgage on a credit card would mean you’re converting low-interest secured debt into high-interest unsecured debt, which is rarely a good idea. Credit card APRs are typically three to four times higher than mortgage rates.
The difference in rates may not matter if you pay off the balance right away. However, if you revolve the balance – meaning you let it carry over to the next billing cycle – you’ll be charged a steep interest rate on top of the mortgage interest you’re already paying. Such debt can snowball fast, leaving you in a difficult financial situation.
Consider how this can affect your credit too. When you carry a high balance on your credit card, it increases your credit utilization ratio (your credit card balance relative to that card’s credit limit). Credit utilization is the second most important credit score factor, responsible for 30% of your credit score. When the ratio exceeds 30%, your credit may take a hit.
Paying your mortgage with plastic may be a good short-term solution that can help you avoid a late payment – if you need a little extra time to pay off the charge. However, it can quickly become problematic if you let credit card debt pile up.
Alternatives to paying your mortgage with a credit card
Finding good alternate options depends on the reasons you’re looking into paying with a credit card.
If you’ve been struggling to cover your mortgage payments on time, charging them on your credit card may only be a Band-Aid solution. Instead, contact your mortgage lender and try to find a better way to address the issue. For example, if your lender may be able to offer you a repayment plan or forbearance.
Alternatively, you might consider loan modification through government programs, such as the Home Affordable Modification Program (HAMP). Such programs are designed to assist people with serious debt problems, so there might be certain qualification requirements to keep in mind.
If, on the other hand, you’re looking to earn rewards, there are plenty of other expenses you can put on your card. For instance, if you’ve been saving for a large purchase, put in on your credit card and pay it off right away. You can also check if you can prepay your utilities with your rewards card, as well as charge your bills on it. Finally, if you’re paying tuition, some schools accept credit card payments without fees – see if yours does, too.
See related: Best credit cards for paying monthly bills
Finding a way to pay your mortgage with a credit card can prove to be challenging and may not be the best choice in the end. While it may seem appealing as a way to rack up rewards or make sure you don’t miss your mortgage payment date, the high fees might not make it worth your while.
Luckily, there are alternatives to paying your mortgage with plastic. Before you draw from your credit line, research other options and you’ll most likely find one that works better for you.