There are a few good reasons to want to pay your mortgage with a credit card. For one, there’s a possibility of earning rewards on your transaction. And it’s much easier and faster to pay your mortgage online with a credit card than to mail a check to your mortgage lender. Some people facing financial troubles may consider using a credit card to pay their mortgage to avoid a late mortgage payment and stay away from foreclosure.
Does Your Mortgage Lender Accept Credit Cards?
Whether you can pay your mortgage with your credit card depends on your lender's payment acceptance rules. Some only allow you to make your mortgage payment through your checking account.
Cost of Paying Your Mortgage With a Credit Card
Some lenders who accept credit card payments charge a transaction fee to process the payment. You see, each time you swipe your credit card, the business accepting that payment has to pay a fee to the credit card issuer, the processing network, and other companies involved in processing the transaction. Mortgage lenders, or the companies they use to process credit card payments, would pass this 2-3% fee on to you. That increases the cost of paying via credit card.
There are a few third-party companies that let you pay your mortgage with your credit card. They act as an intermediate, processing your payment and in turn cutting a back to your mortgage lender on your behalf. It gets the job done, but these companies will charge a fee for the service. One of these services, Plastiq, for example, charges a 2.85% fee to pay your mortgage with a credit card. If you find a service that does this for you, you should make sure the transaction isn’t treated as a cash advance. In that case, you won’t earn any rewards on the transaction and you’ll pay a much higher price on the transaction.
Earning Rewards On Your Mortgage Payment
You may be able to earn rewards by paying your mortgage with your credit card. Before you make that choice, weigh any transaction fees against the rewards you’d earn. For example, if you were earning 1.5% rewards on the transaction, you’d earn $15 by paying a $1,000 mortgage, but the card processing fee could up to $30. It’s not worth it. Unless, however, you were putting your mortgage on your credit card to earn a signup bonus. In that case, the lump sum rewards you’d earn would offset any processing fee you pay on the transaction.
Avoid Using a Cash Advance to Pay Your Mortgage
While you may be tempted to use a cash advance from your credit card to make your mortgage payment, make sure you’re aware of the risks. When you use a cash advance, whether it’s an ATM withdrawal or convenience checks from your credit card issuers, you’ll be charged a cash advance fee.
Cash advance fees are often around $5 or 5% of the transaction amount. On a mortgage payment of $1,000, you’d pay a $50 cash advance fee. Cash advances also are charged a higher interest rate and do not have a grace period. The lack of a grace period means your balance starts accruing interest right away rather than after your billing statement closing date.
Paying your mortgage with a check sent from your credit card issuer would be treated as a cash advance and would incur the same fees and interest.
The Impact on Your Credit Score
Before you pay your mortgage with a credit card, make sure you have enough available credit to process your mortgage payment and any fees charged. Otherwise, the transaction may be declined and you may face additional fees.
Charging your mortgage payment could raise your credit utilization and impact your credit score, particularly if you don’t have a high credit limit on your credit card. Your credit score may recover from points lost due to high credit utilization once you pay your balance down and leave it below 30% of your credit limit.
Even if you’re able to pay your mortgage with your credit card, you only want to do this if you can afford to pay your balance in full. Your mortgage payment already includes a certain amount of interest (which could be hundreds of dollars in interest if you’re in the first few years of your mortgage). You don’t want to pay more interest on top of that by carrying a credit card balance.