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Paying off your mortgage with a credit card: is it a bad idea?



A mortgage payment is often one of the biggest monthly expenses – and if you don’t pay it on time, you’ll be hit with late fees and other penalties. Paying it off with a credit card can sound appealing, whether it’s to close the payroll gap or to win cash back (or both). But paying off your mortgage with a credit card is actually a pretty complicated financial maneuver – many mortgage lenders don’t accept credit card payments because of transaction fees. And some lenders frown on the idea of ​​customers covering one debt with another.

That said, it’s possible to pay off your mortgage with a credit card, but the two main methods – using a third-party processor and converting gift cards to money orders – are less than ideal. Below, we explore how to pay off your mortgage with a credit card and if it’s worth it.

Use a third-party credit service to pay off your mortgage

If your mortgage agent won’t accept payment by credit card, there are services that can help you get around this problem. Companies like Plastiq will charge your credit card for the mortgage amount and then send the money to your service agent. But this workaround comes at a cost, and you’ll pay a fee based on the amount you send to your lender.

Plastiq, for example, charges a 2.85% processing fee and only accepts Discover or Mastercard. If you’re using a credit card to pay off your mortgage on time, you’ll want to do some math to see if the processing fees are lower than the late fees. If earning cash back rewards is your motivation, you will also need to calculate the value of points or miles against the processing fee. For a mortgage payment of $ 1,500, Plastiq would charge you approximately $ 43 in fees. If you only earn 2% cash back with your credit card, that’s a net loss.

The gift card method

Another way to get rewards when paying off your mortgage is to use your credit card to purchase Visa or Mastercard gift cards. (We recommend that you purchase gift cards with PINs which provide better security in the event of loss or theft.) You can then use these gift cards to purchase a money order to pay off your mortgage.

Tedious? Yes. But if you’re committed to getting rewards for your mortgage payments, it’s worth thinking about. You can even buy gift cards from a retailer that offers bigger rewards, like a grocery store.

Money Orders typically cost around $ 1 plus postage and are usually capped at $ 1,000. If your mortgage payment is more than that, you will need to purchase multiple mandates, which can further complicate matters. If your mortgage is managed by a bank with a physical branch, you may be able to buy money orders there and then pay off your mortgage in one trip.

Although you save on the processing fee with the gift card method, it is kind of a pain in the neck. And if you need to mail your payment, keep in mind that it may take several days for the payment to arrive, so you’ll want to submit it early.

Benefits of paying your mortgage with a credit card

Using a credit card to pay off your mortgage could help you avoid late fees and earn free flights and other lucrative rewards. But there are other advantages to paying off your mortgage with a credit card.

  • It can help in case of cash flow problem: If you get paid irregularly or wait for a paycheck to pay off your mortgage, using a credit card can help. Just make sure you have the money to pay off your balance each month – failing to do so could create an even bigger problem with interest and late fees – essentially cancel out any rewards you may have earned by billing your mortgage.
  • It could simplify your payment: Automating your mortgage through a third-party processor and paying just one bill each month for your household expenses could save you time and effort. (If you’re just looking to automate your monthly mortgage payments, many lenders allow you to do that, too.)
  • This could make it easier to track expenses: If you can manage all of your home-related expenses with one card, you can run reports anytime to see your expenses by category.

Risks of paying your mortgage with a credit card

While earning big bonus points on a large credit card purchase may seem enticing, trying to pay off your mortgage with a credit card is often more difficult than it is worth and could create more problems that it does not solve. Here are some of the risks and drawbacks to be aware of:

  • It’s not free: Third-party processors and money orders have fees, although third-party processors cost a bit more. You’ll also need to make sure you pay your credit card in full each month to avoid late fees and interest charges.
  • It’s embarassing: Each method introduces additional steps to pay off your mortgage. Third-party processors require payment through their site, but you should also check your mortgage payment site to make sure payment is made on time. The gift card method involves purchasing gift cards, money orders, and optionally mailing your payment each month.
  • This can lead to debt: Every time you use a credit card, you increase the risk of indebted. If you aren’t diligent in making full payments every month, your debt could snowball.
  • It could damage your credit: Charging your mortgage to a credit card can increase the use of your debt. Your debt utilization rate – how much of the total credit you have available are you using up – is one of the most important factors affecting your credit rating. Using too much of your available credit could lower your score and create problems if you plan to apply for other loans or credit cards. You can also hurt your credit if you miss a payment or don’t pay off your balance in full each month.

Do you have to pay your mortgage with a credit card?

In most cases, it’s more complicated than it’s worth. Third-party payment processors charge almost 3% fees every month, so unless your late fees are much higher or you get 4% or more cash back, it’s not worth it. . Although the gift card method is more affordable, it requires several steps and an investment of time. And unless you pay off your credit card balance in full each month, you’ll have to pay interest charges that could erase any rewards you’ve earned.


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