Paying your mortgage with a credit card would certainly help you rake in the rewards on your credit card, right? Unfortunately, it is pretty difficult to make this happen. Many credit card companies don’t allow you to use a credit card to pay another debt. Even if your credit card company allows it, the card issuer or your mortgage lender might not allow it.
There is an exception to the rule, though. Keep reading to learn how it may be possible to pay your mortgage with a credit card.
The Card Issuers
Your first hurdle is getting past the card issuer – this is the ‘name brand’ of the card, such as Visa, MasterCard, Discover, or American Express. In general, Visa and MasterCard do allow you to pay your mortgage with your credit card, but Discover and American Express do not, there aren’t any exceptions.
There’s still a catch, though. Even though Visa and MasterCard say that it’s ‘okay’ to pay with a credit card, you have to get the approval of the credit card company (Capital One, Bank of America, etc.). Each company has its own rules regarding paying a mortgage with a credit card.
Using a Third Party
There’s a third-party service that can accept your credit card payment and make your mortgage payment for you. Third-party services charge a fee for doing this, though. It’s typically between 2.5% and 3% of your mortgage payment. A $2,000 payment would cost you between $50 and $60.
The third party accepts your mortgage payment via credit card. The service then either cuts the mortgage company a check or sends the payment electronically, if that is an option. You can do this as a one-time payment or set up automatic payments to allow the payment to occur on a regular basis.
Determining if Paying With a Credit Card is Worth It
Because there is a fee to pay with a credit card, you should make sure it’s worth it to do so. Even if you will earn rewards from your credit card, sometimes the fee is larger than what you would make in rewards.
In order to determine if it’s worth it to pay with a credit card, compare the third-party fee to the reward. If the third-party service fee is 2.5%, but you’d only earn 1% in rewards, it would cost you more than you would earn to pay with a credit card.
Will You Pay the Credit Card in Full?
Another factor to consider is how you will pay the debt. Will you pay the debt off in full before the grace period ends? If not, you have to factor in the interest charges for carrying a balance. This too will take away from the rewards you could earn by paying with a credit card.
If you will carry a balance, figure out how much interest you will pay and add that to the fee you pay the third-party service. Compare this total to the rewards you would earn and you’ll likely find that it is not worth paying your mortgage with a credit card.
Think of Your Credit Score
One last factor to consider is how paying your mortgage with a credit card will affect your credit score. Again, if you charge it and don’t pay the balance in full, you will carry a balance. The balance will affect your credit score as your credit utilization rate makes up 30% of your credit score. Your credit utilization rate is the comparison of your outstanding debt to your total credit line. If your mortgage takes up more than 30% of your credit line, you will have a high utilization rate, which could damage your credit score.
The bottom line is that you probably can make your mortgage payment with your credit card, but you probably shouldn’t do it. Unless you are able to get major rewards, such as a big signup bonus or bonus for using your credit card within the first six months, the reward probably won’t exceed the cost of the service charge and/or the interest you’ll pay on the debt.