Can I Pay My Mortgage with a Credit Card?

The idea of paying your mortgage with a credit card might seem appealing, especially if it means earning rewards or temporarily easing financial strain. However, it’s a decision that requires careful consideration.

Can you use your credit card to pay off your mortgage? Technically, yes – but it’s not as simple as swiping your card at the bank. There are workarounds and fees involved, making it crucial to weigh the pros and cons before considering this approach.

Mortgage lenders generally don’t accept credit cards directly due to processing fees and the potential for borrowers to replace low-interest secured debt with high-interest unsecured debt. To bypass this, third-party services like Plastiq act as intermediaries.

Here’s the Process:

1. Sign Up: Choose a reputable payment service like Plastiq that allows credit card transactions for bill payments.
2. Check Card Eligibility: Confirm your credit card (e.g., Mastercard, Discover), and the service allows mortgage payments. Some cards may have restrictions.
3. Link Accounts: Provide your mortgage account details through the service.
4. Make the Payment: The service charges your credit card, adds a processing fee (around 2.85% – 2.9%)., and sends a payment (usually a check) to your mortgage lender.

While generally not advisable, there are specific scenarios where paying your mortgage with a credit card could be strategically beneficial:

1. Earning a Sign-Up Bonus: Many rewards credit cards offer generous sign-up bonuses (e.g., tens of thousands of points or a few hundred dollars in cash back) after you spend a certain amount within a specific timeframe. If your regular spending won’t meet the threshold, using Plastiq to pay a mortgage installment or two could help you secure the bonus, potentially outweighing the processing fee. This strategy only works if you can pay off the entire credit card balance before interest accrues.

2. High Rewards Rate: Your credit card offers a high rewards rate (e.g., 3% cash back or more) on all purchases. If the rewards rate exceeds the processing fee (usually 2.85% – 2.9%), you could come out ahead in terms of net rewards earned. This requires consistent, full payment of your credit card balance to avoid interest charges that would negate the rewards.

3. Strategic Delay and Avoiding Late Fees: You’re facing a temporary cash shortage but expect funds to arrive soon after your mortgage due date. Paying your mortgage with a credit card through Plastiq can act as a bridge, buying you a few weeks to gather the necessary funds. This can help you avoid late fees and potential negative impacts on your credit score. This is a short-term solution. Ensure you can pay off the credit card balance in full before the due date to avoid high interest charges.

4. Leveraging 0% Introductory APR Offers: You have a credit card with a 0% introductory APR period on purchases. You can temporarily transfer your mortgage payment to the credit card and pay it off over several months without accruing interest. This could be helpful in managing cash flow during a specific period. Be sure to pay off the balance before the 0% APR period ends, or you’ll face high interest charges.

5. Building Credit with a New Card: You have a new credit card and want to establish a good payment history. Making a large, on-time payment like a mortgage installment can positively impact your credit utilization and overall credit score. This only works if you can consistently pay your credit card bill in full and on time.

In most situations, using a credit card to pay your mortgage is financially unwise:

1. Carrying a Credit Card Balance: The average credit card APR (Annual Percentage Rate) is significantly higher than mortgage interest rates. Carrying a balance means paying exorbitant interest, quickly negating any potential rewards.

2. Financial Difficulty: If you’re struggling to meet regular expenses, using a credit card for your mortgage could lead to a debt spiral. Prioritize essential needs and explore alternative solutions for financial hardship.

3. High Credit Utilization: Your credit utilization ratio (the amount of credit you use compared to your total available credit) is a crucial factor in your credit score. Adding a large mortgage payment to your credit card could significantly increase this ratio, harming your creditworthiness.

4. Potential for Missed Payments: If you can’t consistently pay your credit card bill in full, you risk late fees, penalty APRs, and damage to your credit score. This could also put your mortgage in jeopardy if payments aren’t made on time.

5. Limited Credit Card Options:  Not all credit card issuers or networks permit mortgage payments through third-party services. This could restrict your options or make it impossible altogether.

According to a study by CreditCards.com, only 27% of credit card users pay their balance in full each month. This means the majority of people would likely face high interest charges if they used a credit card to pay their mortgage. The Consumer Financial Protection Bureau (CFPB) warns that using credit cards to cover essential expenses like housing can be a sign of financial distress and may lead to further debt problems.

Paying your mortgage with a credit card is a complex decision with potential benefits and risks. Analyze your financial situation, weigh the pros and cons, and consider alternative strategies before proceeding. Remember, responsible credit card use is key to maximizing rewards and maintaining a healthy financial life.