For most homeowners, mortgage payments rank among their most costly annual expenses. You may be seeking means to pay your mortgage with a credit card if you want the most rewards from your credit card. Settling a mortgage with a credit card during difficult times can save time and enable you to make payments on the mortgage over several months. You will also receive many rewards, including a significant welcome bonus, which is unlikely to be obtained from spending cash.
There are numerous ways of employing your credit card to make mortgage payments, even though most mortgage companies refuse to accept them. However, using a credit card comes with its benefits and drawbacks.
Is It Possible to Use a Credit Card to Pay Your Mortgage?
You could pay the mortgage with your credit card, but it would be difficult as you are more likely to encounter specific issues. The initial step would be to discover an alternative since banks that offer mortgage loans generally do not permit direct credit card payments.
The next issue would be that the alternatives that allow you to pay your mortgage with a credit card could be costly. If you are interested in it for the benefits, this cost may make paying your mortgage with a credit card far less appealing. Generally, mortgage companies prohibit customers from paying their mortgages with credit cards. Mortgage companies are not willing to cover the 1.3% to 3.5% of transaction value that the processing fees of credit cards often cost. Furthermore, the mortgage business does not wish to have the risk of a chargeback if the cardholder disputes the transaction.
However, homeowners can use credit cards to make their monthly mortgage payments with the help of third-party companies and other payment options. It is not advisable if you are hoping to earn additional rewards, as these businesses often charge fees significantly greater than the rewards you can obtain. Despite the additional costs and procedures involved, there are certain instances in which paying your mortgage with a credit card can certainly be more logical.
Should You Use a Credit Card to Pay Your Mortgage?
If your rewards can cover the costs, paying your mortgage using a credit card would be a great choice. Furthermore, credit cards generally provide a minimum of a 21-day grace period, giving people more time to collect the required money to make payments.
You should consider using a credit card to pay for your mortgage only if it benefits you. For many homeowners, the added expense and risks to their credit score may not be worth it. They are only convinced it is worthwhile if they can take complete advantage of a credit card’s benefits. To do this, they need to figure out all the different ways to use their credit card to enjoy advantages unrelated to mortgages.
Benefits of Paying Your Mortgage with a Credit Card
New Card Incentives
It is practical to pay your mortgage with a credit card if you want to avail the welcome benefits that come with it – rewards that you may not be able to avail of otherwise. Even if it charges a certain amount of processing fees, paying your mortgage with a credit card can leave you far ahead if you do not have enough expenses to pay with your credit card to meet the threshold. If you earn much greater rewards than you have to pay for card processing fees, settling your mortgage with it is wiser.
More Time To Pay Off Your Mortgage Loans
Ensure you have enough funds in the bank to pay your monthly credit card payments if you are considering a credit card to pay your mortgage. Any benefit of paying with a credit card will be nullified if you let your loan remain unpaid; consequently, the interest will increase. Besides risking your mortgage payments, frequent late payments can destroy your reputation.
You can change your mortgage to a credit card if you cannot pay by the due date, but you can pay by the due date of your following credit card statement. You can prevent late fees and penalties by settling the outstanding balance immediately after you get your paycheck and credit card statement.
Lowers Interest Rates And Fees
If you want to spread your monthly payments out or become debt-free, paying your mortgage with a credit card is not advisable. Although the average credit card interest rate is over 18%, many cards have variable rates. Your mortgage has a low and frequently fixed interest rate. Transferring a low-interest secured loan to an unsecured credit card with a greater interest rate could lead to bankruptcy.
Drawbacks of Paying Your Mortgage with a Credit Card
- The cost of the fees could exceed the rewards you get.
- Not all credit cards are capable of being used to pay a mortgage.
- Your credit score could be lowered when you make mortgage payments on a credit card.
- If you fail to stay on top of your credit card payments, excessively depending on your credit card to pay your mortgage will likely worsen your financial position.
How to Use a Credit Card to Settle Your Mortgage?
Using a credit card to pay your mortgage could be challenging at times. However, the additional advantages make it worthwhile. Here are a few choices you could consider.
Use Of Third-Party Services
These services accept credit card payments. They deliver the money to the mortgage lenders via postal mail or electronically. To recover their costs, third-party services like Plastiq charge a fee of around 3% of the transaction’s value on the cardholders. For a 2.9% fee, Plastiq.com permits users to pay many bills via a credit card.
Money Order Purchases
You can purchase money orders by purchasing prepaid gift cards with your credit card. The use of money orders to pay a mortgage is similar to the use of personal checks. Given the risk of fraud, several retailers no longer accept prepaid gift cards for money orders. Generally, retailers charge $1 for each $500 worth of money order.
Purchasing Prepaid Gift Cards
Certain mortgage firms enable customers to pay with debit cards. You could purchase a prepaid Visa, Mastercard, American Express, or Discover gift card through a credit card to make those payments if your mortgage company enables debit cards. Generally, fees for prepaid gift cards cost $5 to $10 per card. Such costs can reduce the value of the rewards, mainly if it necessitates purchasing multiple cards to complete your transaction.
Bottom Line
Before paying your mortgage with a credit card, consider the necessary cost structures and the additional work. It is advisable to choose this action only if you have sufficient cash in your bank to settle your credit card entirely. However, using a credit card to pay for your mortgage is logical, but remember the various other ways of gaining rewards. You could earn points for years with innovative planning and a few credit card welcome bonuses.
