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Can you pay your mortgage with a credit card? What cash-strapped homeowners and rewards-points lovers should know

·3 min read
Can you pay your mortgage with a credit card? What cash-strapped homeowners and rewards-points lovers should know
Can you pay your mortgage with a credit card? What cash-strapped homeowners and rewards-points lovers should know

Tempted to make your mortgage payments with a credit card, because it sounds like a way to send your rewards points through the roof?

Or maybe you feel the need to put a payment or two on your credit card because your household budget is feeling the squeeze of inflation. You wouldn’t be alone.

The end of mortgage forbearance from the CARES Act in June 2021 made it hard for some people still financially affected by the pandemic to make their payments. According to a May release from the Federal Reserve Bank of New York, about 24,000 individuals had a new foreclosure notation added to their credit reports during the first quarter of 2022, compared to only 9,000 individuals in the fourth quarter of 2021.

The more you look into the idea, the quicker you’ll see that making a mortgage payment with your credit card rarely makes financial sense.

Is making a payment on your credit card worth the risk of possibly carrying that amount on your credit card balance?

In the end, it’s a game of numbers. You'll have to decide if the points you’re chasing outweigh the potential costs. That's if your mortgage lender is even willing to go along.

Here are six reasons why paying your mortgage with a credit card is probably a nonstarter.

1. Your mortgage lender likely won't allow it

Most mortgage servicers won't allow borrowers to make their payments with a credit card.

Policies vary. But lenders generally prefer taking your cash over a transfer of debt.

2. Your credit card may not allow it either

Visa, Mastercard and American Express have no problem with cardholders making mortgage payments and collecting rewards points from the transactions.

However, Bank of America generally does not allow mortgages to be paid with the credit cards it issues.

3. You can use a go-between, but it'll cost you

You can get around any objections from your mortgage lender or credit card by using a third-party payment provider as a go-between.

These services accept your credit card payment, then cut a check to the mortgage lender. And, they charge a processing fee for the service — typically up to 3%. If your monthly mortgage payment is $1,000, the fee would be $30.

4. Your credit card might hit you with fees, too

Before using your credit card to pay either your lender or a third-party, you'll want to confirm with your card issuer that the payment will not go through as a cash advance.

Cash advances come with their own fees and a higher interest rate. Credit card purchases typically have an APR of 12% to 20%. The APR on cash advances can reach up to 25%.

5. Don't forget interest and other fees

If you're not able to pay off the mortgage charges put on your credit card each month, you'll be stuck paying interest, too. And if you load up your card with debt, you could have trouble getting rid of it — and damage your credit score.

If you're late with a card payment, you'll trigger additional fees and risk doing further harm to your credit score.

6. The math often just won't work

The best opportunity to use mortgage payments to leverage rewards is through a credit card's initial sign-up bonus. Many cards offer enticing bonus points if you spend a certain amount during the first few months.

The rewards might be worth the equivalent of up to 30% of what you spend. That could be more than enough to cover the various services fees and higher interest. But most rewards programs offer everyday returns of 2% or less.

If your returns from using the credit card are likely to be outweighed by the costs, put your credit card back in your wallet — and keep making your mortgage payments some other way.

What to read next

— With files from Samantha Emann

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.