Should I pay my mortgage with my credit card to earn credit card rewards?

By Amy Fontinelle AAA
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. What is the difference between a prepaid credit card and a gift card?

    Although prepaid and gift cards are used in the same manner, a prepaid credit card can be used repeatedly, while a gift card ...
  2. What are the differences among a real estate agent, a broker and a realtor?

    Learn how agents, realtors and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What do real estate attorneys do?

    Understand the role of a real estate attorney to help you decide if you would benefit from the expertise of this type of ...
  4. What are the requirements for an FHA loan?

    Qualify for homeownership with an FHA-backed mortgage. Borrowers with imperfect credit benefit from this government-sponsored ...
RELATED TERMS
  1. Credit Card Authorized User

    Definition of an authorized user of a credit card.
  2. EMV

    A standard relating to integrated circuit cards, point-of-sale ...
  3. Integrated Circuit Card

    A card that has an embedded circuit, such as a computer chip. ...
  4. Forbearance

    A temporary postponement of mortgage payments.
  5. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes ...
  6. Gray Charges

    Fees consumers pay via credit card or debit card for unwanted ...
comments powered by Disqus
Related Articles
  1. 7 Ways To Save Money On Business Travel
    Savings

    7 Ways To Save Money On Business Travel

  2. 10 Steps For First-Time Home Buyers
    Home & Auto

    10 Steps For First-Time Home Buyers

  3. Credit Cards With Travel Insurance
    Insurance

    Credit Cards With Travel Insurance

  4. 8 Common Refinance Mistakes
    Home & Auto

    8 Common Refinance Mistakes

  5. Is Cash or Credit Better for European ...
    Credit & Loans

    Is Cash or Credit Better for European ...

Trading Center