A:

Paying a large, recurring bill with a credit card certainly sounds like a smart way to maximize the points, cash back or frequent flier miles you earn from your card. But if you try to pay your mortgage with your credit card to earn cash back rewards, you'll discover that your options are extremely limited and are unlikely to pay off. Mortgage servicers usually do not allow borrowers to make direct payments via credit card. You may be able to indirectly pay your mortgage if your credit card offers a bill pay service, but these services usually limit cardholders to a preselected list of potential payees, which are unlikely to include your mortgage servicer.
Bill pay services that do provide the option to pay your mortgage with your credit card may not give you any rewards for doing so. That being said, as long as there are no fees associated with paying this way and you pay your credit card bill in full and on time, you can take advantage of the float, the period between when you charge your mortgage payment and when your credit card bill is due. The float effectively lets you keep your mortgage payment in your bank account longer and earn an extra few weeks' worth of interest. In a low-interest-rate environment, the float won't help you earn any meaningful amount of interest. In a high-interest-rate environment, particularly if your mortgage payment is large, the interest you earn during the float could add up.

There are third-party services that help you pay your mortgage using your credit card, but the fees they charge will probably exceed the credit card rewards you would receive. For example, if the fee is 2% of your mortgage and your credit card pays 1% cash back, you'll lose money by paying this way. There is one viable option that lets you combine mortgage payments with credit card rewards. Some lenders offer a cash-back credit card that automatically applies your cash back to your mortgage principal. This automated savings feature ensures that you put your credit card rewards to good use instead of spending them at the mall. If you miss a credit card payment or carry a balance, however, the credit card won't actually help you. The interest and late fees you'll pay will far exceed your cash back rewards.


RELATED FAQS
  1. How do secured credit cards help me build my credit score?

    Find out how secured credit cards function and why they can be very useful for those looking to build or rebuild their credit ... Read Answer >>
  2. What are some common models that practitioners use in quantitative analysis of equity ...

    Understand which aspects of a credit card agreement make accepting a new credit card offer a good deal or one that should ... Read Answer >>
  3. What is the best way to start to rebuild your credit after a bankruptcy?

    Find out some simple steps you can take to rebuild your credit score gradually after filing a bankruptcy, starting with a ... Read Answer >>
  4. How do I get a higher limit on my credit cards?

    Understand how credit limits work with major credit card companies and things you can do to get a higher limit on your credit ... Read Answer >>
  5. Where are secured credit cards accepted?

    Repair a damaged credit history or establish one by opening a secured credit card account with a collateral deposit into ... Read Answer >>
  6. Can a Best Buy credit card help you build credit?

    Learn about how using a Best Buy credit card responsibly can lead to a higher credit score and lower interest rates on mortgages ... Read Answer >>
Related Articles
  1. Options & Futures

    6 Major Credit Card Mistakes

    Avoid these pitfalls to keep your credit score healthy and your debt under control.
  2. Credit & Loans

    10 Reasons To Use Your Credit Card

    Charging purchases is not always a no-no. In fact, there are some very sound reasons for choosing this option.
  3. Credit & Loans

    Credit Card Or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  4. Personal Finance

    How Many Credit Cards Do You Carry in Your Wallet?

    With the abundance of credit card offers in mailboxes, advertised on TV and offered at retail stores, it's no wonder Americans have a lot of credit debt.
  5. Budgeting

    5. Pay In Cash

    With a little time and effort, you can minimize the amount spent on this essential expense.
  6. Credit & Loans

    Should You Use Credit Cards To Fund Your Business?

    We give you 4 reasons to consider using a credit card instead of a business loan to fund your business, and how to be smart about it.
  7. Credit & Loans

    Credit Cards: Types Of Credit Cards

    By Brigitte YuilleCredit card products come in a wide assortment these days. Some credit card programs will ease their terms and conditions and offer perks for people with stellar credit, such ...
  8. Credit & Loans

    Using Your Credit Card To Rebuild Credit

    Responsibly using credit cards is one of the best ways to rebuild a poor credit rating.
  9. Credit & Loans

    Terrible Credit Score? Try These Credit Cards

    When your credit is less than stellar you have fewer choices. But some are still better than others. Here's our read on which cards to get.
  10. Credit & Loans

    Use Your Credit Card To Boost Your Credit Score

    Misusing credit cards can blow your credit – but using them well can boost your score. How to grow a history, fix bad credit, make good credit even better.
RELATED TERMS
  1. Secured Credit Card

    A type of credit card that is backed by a savings account used ...
  2. Balance Chasing

    The gradual lowering of a consumer’s credit limit by a credit ...
  3. Minimum Payment

    The smallest amount of a credit card bill that a credit card ...
  4. Late Fee

    A charge a consumer pays for making a required minimum payment ...
  5. Credit Card

    A card issued by a financial company giving the holder an option ...
  6. Prepaid Credit Card

    A card issued by a financial institution that is preloaded with ...

You May Also Like

Trading Center