If you have a large available balance on your credit card, you may wonder if you could charge your mortgage payment on it. Whether you want to do it for the rewards or because you don’t have the cash available, you may be out of luck.
Many lenders don’t allow you to pay your mortgage payment with a credit card. In fact, you’ll probably be hard-pressed to find a willing lender. Even if you do, your credit card company may not allow it on their end.
If you really want to make this happen, you have a lot of legwork ahead of you.
Does Your Credit Card Company Allow It?
The first place you should check is with your credit card company. For example, Mastercard often allows consumers to pay their mortgage with a credit card. Visa, on the other hand, only allows it for prepaid and debit cards. Typically, Discover and American Express do not allow you to pay your mortgage with their credit card.
Even if the payment processor (Visa or Mastercard) allow you to pay your mortgage with the card, it doesn’t mean the issuing bank will allow it. That’s another entity you must check with to see if you can pay your mortgage with a credit card. Typically, any bank that you have their credit card and your mortgage is through them will not allow this practice. Many banks won’t let you pay your mortgage with their credit card even if it’s not with them, though.
Does Your Lender Allow It?
You may even want to start with your lender. If your lender doesn’t allow you to pay your mortgage with a credit card, then you can stop there. Mortgage companies look at it as if you are paying a debt by making another debt. In essence, you really aren’t paying the mortgage, you are just transferring the debt. Most mortgage companies want to avoid this practice so they just don’t allow it.
It May Cost Money to Use Your Credit Card
When you go to the store and swipe your credit card, the store pays a fee for you to pay that way. Typically, they don’t pass that fee on to the customers, though. The cost is built into the store’s prices. When you pay your mortgage with a credit card, though, the bank will not cover that fee – they will pass it along to you. We are talking between 2% and 3% of the transaction. This means paying with your credit card just got more costly.
Even if you are able to get around a lender that won’t allow you to use a credit card by using a processing service that makes the payment for you, you’ll pay a fee. One such service is Plastiq. You pay Plastiq with your credit card and then Plastiq pays your mortgage company. Again, there is a fee, usually between 2% and 3%. Is it worth paying with your credit card if you’ll pay more?
Determine the Rewards
If you want to pay your mortgage with a credit card in order to earn rewards on your credit card, think carefully. Determine how much the transaction will cost you to do. Then compare that cost to the rewards you may earn.
For example, if you were able to earn 2% in rewards on your credit card, but your bank will charge you 3% in service fees, it doesn’t make sense to do it that way. Just pay close attention to the fees charged and what rewards you will earn. If you have a credit card that offers special rewards for larger purchases, or you are trying to qualify for a signup bonus by spending a certain amount in a short time period, then it may be worth it.
Watch How Much you Spend
Since your mortgage payment is likely pretty large, there’s a chance that your credit utilization rate can get out of hand. Your credit utilization rate is the amount of credit you have outstanding compared to your total credit limit. Ideally, you shouldn’t have more than 20% outstanding, 30% at the maximum. If your mortgage payment takes up more than 20% – 30% of your total credit limit, it could damage your credit score.
Even if your mortgage payment is only a fraction of your total credit limit, your score may still be affected. If you have other items charged on the credit card that you use, the mortgage payment will only drive the balance up higher, which could lower your credit score.
In short, you may be able to pay your mortgage with your credit card, but it may not be recommended. Think long and hard about the consequences of paying your mortgage this way. Also, consider how much it may cost before you make a final decision.