Mortgage and credit card debt are night and day when it comes to the damage they do to your income power. More precisely, mortgage rates can be around 3% to 4% while credit card rates can be as high as 36%. If you have both a mortgage and a credit card at hand, you may be wondering if you can use the latter to pay the former…
In short, yes. It’s possible to pay a mortgage with your credit card, but this will largely depend on the terms of your card, the card network, and your mortgage lender. Generally speaking, lenders don’t like the idea that you pay your debt with debt. And frankly, you may not want to either.
In this article, I want to list some of the reasons that people use as justification to pay off mortgage debt using credit cards along with an explanation on how this could be possible if your lender doesn’t allow it.
I will also outline the pros and cons of using credit card debt to pay your mortgage so you can have a better view of whether you would benefit from this or not.
Sounds good? Let’s get started then…
Why Would You Pay your Mortgage Using a Credit Card?
If you are here, there’s a good reason that you want to use your credit card to pay your mortgage because of credit card rewards.
While this may be a good way to take advantage of your credit card reward system, if you forget to pay it back by the end of the month, this mistake could cost you dearly, wiping out all of the potential rewards you might earn.
Another less common reason for this practice is to leave your money in the bank a little bit longer to let it earn some extra interest. But unless your cash is in a high-yield savings account, this may not make much sense, considering the very low interest rates that banks provide.
Or you might want to avoid making a late payment to the mortgage company or bank. This may make sense if you’re 100% certain that you will pay off your credit card on time. But if you don’t have the money to pay off your mortgage on time, chances are you will have difficulties paying off your credit card on time too.
This reason is the scariest one and in this situation, it is far better that you make a late payment on your mortgage than risk being charged a credit card interest rate.
Now that you understand which reasons are innocent and which can be destructive, roll up your sleeves and let’s see how you can make mortgage payments using a credit card.
How to Pay your Mortgage Using a Credit Card
If the terms of the credit card or the lender don’t allow you to pay your mortgage using a credit card, there is a workaround.
You could use a third-party transaction service like Plastiq. Such a service will basically allow you to pay bills with a credit card even if your lender doesn’t partner with them. But make sure you can afford to pay the high fees these services come with. Plastiq charges 2.85% for each transaction.
This is a good alternative if you can’t seem to find any other way, but make sure that such a fee is worth what you’re trying to do. To put things in perspective, imagine that a monthly $1,000 mortgage payment will cost you an extra $28.50 per month.
How Paying Your Mortgage with a Credit Card Impacts Your Credit Score
First, understand that paying an amount that is higher than 30% of the credit limit you have available with your credit card may negatively impact your credit score. To be safe, you should be using less than 10% of your available credit.
Or you can make sure that your credit is high enough that it could take a hit if you use too much of it. But don’t let the balance carry over to the next month as you’re going to have bigger problems than a temporarily bad credit score.
Pros and Cons of Paying a Mortgage with a Credit Card
Now let’s examine the pros and cons that come with paying a mortgage with a credit card…
Pros:
- You Could Improve your Credit Score
If you are determined to improve your credit score through a credit card, then this might be a good way to do it if you have the money to pay it off on time. - You Could Get Sign-Up Bonuses
If you just got a credit card, then you may be eligible for sign-up bonuses if you spend a certain amount of money in the first few months after signing up for the card. - You Could Get the Cash Faster than If you Applied for a Personal Loan
If you are in a hurry and think you need cash fast, then paying your mortgage with your credit card will be much faster than getting a personal loan. Just be careful that you can pay off your credit card before the next billing cycle so you don’t get charged the enormous interest rates that credit cards come with.
Cons:
- If your Lender Doesn’t Accept a Credit Card Payment and You Go with a Third-Party Service, you Will Be Charged Additional Fees
- High Interest Rates If you Don’t Pay off your Credit Card Bill On Time
- If you Don’t Have A Lot of Credit Available, You May Hurt your Credit Score
Conclusion
As I told you, your lender might or might not allow you to pay off the mortgage using a credit card. But even if they don’t, you can find some third-party services that can help you do it anyway.
All in all, there are both advantages and disadvantages to using a credit card to pay off mortgage debt. If you keep the above considerations in mind and evaluate whether you would benefit from this or not, you’ll be fine.
Now, did this article answer your question? If so, please use the social media buttons below and share it with others. And if you have any questions, let me know in the comments and I will get back to you as soon as I can.
Take care for now and I’ll talk to you next time…
Disclaimer: This information should not be viewed as financial advice. You should consult a financial advisor or do your own due diligence before you invest. The owner of this website and author of this article are not to be held liable for any undesired result by anyone who uses this information that is provided here in any way.
