Before the housing crisis of 2008 many credit card companies allowed cardholders to pay their mortgage using their credit card. However, that has been discontinued by most creditors.
Sometimes cash flow is limited making it necessary to use credit to pay your mortgage.
In this article we’re going to explore some options to make your mortgage or rent payment using a credit card.
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Pros of Paying Your Mortgage with a Credit Card
- Get credit card reward points for every dollar you spend
- Ability to pay payments on the balance
- Great to use in an emergency when you lack the funds
- Protect yourself from late payments dropping your credit score.
There are pros of using a credit card to make your mortgage payment, however, the drawbacks usually outweigh the benefits.
If you are trying to earn more credit card rewards points by using your card you will probably spend more on fees than it’s worth. Mortgage lenders that do allow you to pay with your credit card will charge a fee of 2-3% for making the payment. This fee is usually higher than any type of credit card rewards you will receive.
Paying a loan with a credit card should be a last resort. If you have the money in your bank account then you should pay your mortgage by debit card, check, or ACH.
However, if you have exhausted all options and you simply cannot afford to make your monthly payment it’s reasonable to pay by credit card until you can catch up.
Cons of Paying Your Mortgage with a Credit Card
- Charged interest on your payments
- High APR on cash advances
- Added fees for making payments
- Decreases your credit score
Generally we would advise against using a credit card to pay your rent or mortgage. However, we realize that sometimes you cannot avoid it.
There are options to use a credit card even if your landlord or mortgage lender do not accept credit cards. Plastiq, Rentshare, and Venmo are just a few of the companies that offer bill payment services.
You will be charged a fee of 2.5%-3% for using a card, but if you have no other way to pay it then it is acceptable to use a credit card.
Your credit utilization ratio is the amount of available credit you are using up. The higher your card balances, the lower your credit rating will be. We recommend keeping your card balance below 15% of your credit limit.
By making your loan payments with a credit card you’re adding quite a bit of debt onto your credit which will lower your credit score. A single late payment reported to the credit bureaus can significantly damage your credit score.
Use Plastiq to Pay your Mortgage
Plastiq is a third-party company that allows you to use a credit card to pay companies that do not accept card payments.
You simply make a credit card payment to Plastiq plus a fee of no more than 2.5%. Plastiq then sends a check to your mortgage lender that will be credited to your account in a matter of a few days.
They accept all major credit cards including Visa, MasterCard, American Express and Discover.
The quickest way to pay your monthly mortgage payment using a credit card would be to get a cash advance. Most credit cards allow you to pull cash out of an ATM using your credit card. However, the rates for a cash advance are typically much higher than regular purchases so you will want to pay back the advance as soon as you can.
Both MasterCard and Visa allow mortgage lenders to accept credit cards for mortgage payments. However, the number of lenders willing to accept credit card payments has shrunk drastically in the past few years.
And if a lender does allow you to pay with a credit card there will in all likelihood be a fee of 2-3% of the payment amount.
Lower Your Monthly Payment
If you’re having difficulty making your loan payments you should look into refinancing your mortgage. When you refinance your loan you can take advantage of low interest rates and reset the loan term which could save you hundreds of dollars on your monthly payment.
The Bottom Line
When it comes to paying your mortgage with a credit card there are certain risks involved. While it may sound like a good idea in order to rack up credit card rewards, the fees associated with using credit may outweigh the rewards you’ll receive.
If you find yourself in a bind and unable to make your monthly payment then using a credit card to make the paying and avoiding a late payment is reasonable.
Some mortgage lenders may accept credit card payments with a 2-3% fee added. If your lender does not accept credit card payments you can use a third-party company such as Plastiq to make the payment.
If you find it difficult to make your monthly mortgage payments you should speak to a loan officer about the possibility of refinancing your loan into a lower rate.