Do you want to pay your mortgage with a credit card? It might be possible, but it will probably cost you. How do you do it? What’s the cost? And when is it worthwhile? This article will answer all of your questions about charging your monthly mortgage payment.
- Mortgage lenders don’t accept credit card payments directly.
- If you have a Mastercard or Discover card, you may be able to pay your mortgage through a payment processing service called Plastiq for a 2.85% fee.
- Because of the fee, paying your mortgage with a credit card will not be worth it most of the time for most people.
Why Pay Your Mortgage with a Credit Card?
There are four reasons why someone might consider making their monthly mortgage payment with a credit card:
- To earn credit card rewards
- To hang onto their cash and bank a couple of extra weeks’ worth of interest
- To buy a couple of extra weeks to pay the mortgage without making a late payment to the mortgage company
- To avoid foreclosure at all costs
These are all valid reasons to pay your mortgage with a credit card. The first three of these reasons might give you a slight financial edge in the long run. The fourth could be incredibly destructive. We’ll look at each option in more detail below, but first, let’s explore the logistics of paying your mortgage with a credit card.
Third-Party Payment Services
Many creditors, including mortgage lenders, will not accept credit cards to pay off debt. For one, the institution may face a transaction fee from the credit card company. But more significantly, they know that doing so would mean letting customers trade one form of debt—a relatively low-interest and sometimes tax-deductible form—for another with higher interest and no tax deduction. Politicians, regulators, and the news media would have a field day decrying such a practice.
Enter third-party payment processors. These companies will let you use a credit card to pay almost any entity. While the competitive landscape is always evolving, the best-known—and seemingly only—player that processes mortgage payments is Plastiq, which charges a 2.85% transaction fee. You might be able to find a referral code online that gives you a few hundred dollars in fee-free transactions, but that will only get you so far—unless you find a way to earn more free transactions by referring others yourself.
Paying your mortgage with a credit card has some restrictions, even with Plastiq. The terms and conditions prohibit you from using a Visa or American Express card to pay your mortgage through Plastiq. Considering that other payment processors have come and gone in the past, Plastiq may not be around forever, or it may not always be an option for making mortgage payments. Mastercard and Discover could stop allowing mortgage payments through the service altogether. Conversely, more options could become available in the future to pay your mortgage with a credit card, perhaps with more-competitive fees or new perks.
Should You Pay Your Mortgage with a Credit Card?
Let’s walk through each of the four reasons why you might want to pay your mortgage with a credit card and see whether they’re good ideas or not.
To Earn Rewards
Credit cards have two main types of rewards: sign-up bonuses and ongoing rewards. A sign-up bonus might give you $300 cash back for spending $3,000 in your first three months as a cardholder. Ongoing rewards might give you 2% back on every purchase, including the purchases you make to earn the sign-up bonus.
Let’s say your mortgage payment is $1,000. If you incur a 2.85% fee to make that payment, you’re losing $28.50. Still, you might be able to come out ahead in one of these scenarios:
- Your credit card offers ongoing cash back (or the equivalent in points or miles) of 3.0% or more on this payment.
- Your credit card company doesn’t categorize the third-party payment processor’s charge as a cash advance. Cash advances generally incur fees and always begin accruing interest immediately. Check your credit card agreement to find out your card’s cash advance rules. Even if everything looks good, you may want to make a small test purchase through the payment processor before making your full mortgage payment to verify that your transaction will be treated as a purchase.
- You’ll earn a sign-up bonus worth more than the processing fee, and you wouldn’t be able to earn the sign-up bonus through your usual spending. This might be the most compelling reason to pay your mortgage once or twice with a credit card.
- You’ll earn some other credit card benefit from the purchase that’s worth more than the fee, and you wouldn’t be able to earn this benefit through your usual spending. Benefits that you might be trying to earn include airline status, hotel status, a free hotel night, or a free airline ticket for a companion.
As of this writing in April 2022, the average credit card interest rate is 19.49%, more than three times the average mortgage interest rate of 5.39% for a 30-year fixed-rate mortgage. If you can’t pay your credit card balance in full by the due date, your card will be a very expensive way to make your mortgage payment.
To Earn Interest
If you don’t carry a credit card balance, you get an interest-free grace period on your purchases. This period lasts around 21 to 25 days starting when your credit card statement is issued and ending when your payment is due.
Over the course of a year, taking advantage of this grace period by keeping your cash in savings—where it earns interest—until your credit card due date might earn you a few extra bucks. It’s not a bad thing to do with purchases that you were going to make anyway, as long as you never make a late payment or carry a balance.
The best high-interest savings accounts in 2022 only pay 0.7% interest annually, however. Twenty-five extra days of interest on your mortgage payment at that rate won't put you out ahead after a 2.85% payment processing fee.
To Avoid a Late Payment
Your mortgage payment is usually due on the first of the month. However, many lenders give borrowers until the 15th to make their payment without a late fee. Once this grace period ends, lenders impose hefty late charges (check your statement to see how much), but a late payment won’t actually be reported to the credit bureaus until it is 30 days past due.
If you need more than the 15-day grace period to pay your mortgage but want to avoid a late fee and credit score damage, you could pay your mortgage with a credit card on the 14th to buy yourself about 25 more days to make your mortgage payment, assuming you're not carrying a balance on your card.
You could come out ahead if the payment processor’s fee is less than your lender’s late fee and if you pay off your credit card balance in full by the due date. If you don’t, you could end up in worse financial circumstances by paying credit card interest, depending on how long it takes you to repay what you owe.
To Avoid Foreclosure
An extension of the idea above is to pay your mortgage with a credit card to avoid foreclosure. It’s understandable to want to do anything possible to remain in your home. Nevertheless, if you’re so far behind on your mortgage payments that you’re facing foreclosure—a process that your lender can’t initiate until anywhere from three to six months after your late payment, depending on the state where you live—your financial circumstances are probably so tenuous that adding credit card debt to your problems is not in your best interest. Talking to your lender and a housing counselor about a plan to avoid foreclosure, perhaps through a loan modification, is probably a better idea.
Final Tip: Consider Your Credit Utilization
Another factor to consider is the effect of credit card mortgage payments on your credit utilization ratio, the percentage of your credit line that you’re using when your statement is issued. According to FICO, which generates the credit scores that most major lenders use, credit utilization accounts for 30% of your credit score. If you don’t want the fact that you’re paying your mortgage via credit card to affect your credit score, you will need to pay off your balance before your statement is even issued—not just before your statement due date.
That said, if you have a high credit line and only use a minuscule percentage of it—say, less than 10%—then you don’t need to worry about paying your balance before your statement comes out. Such a low credit utilization ratio is unlikely to harm your score.
An Example of Paying Your Mortgage with a Credit Card
After reading a headline like “How We Earned $2,000 in Credit Card Rewards Paying Off Our Mortgage,” who wouldn’t want to pay their mortgage with a credit card? It’s a true story that personal finance blogger Holly Johnson pulled off—and she used the rewards to help fund a Mediterranean cruise for her family of four.
However, she was only able to achieve it because her platform as a high-profile blogger allowed her to earn thousands of dollars in free Plastiq transactions by referring her readers to the service. Most of us can’t do that.
Still, if you have excellent credit, you'll find many opportunities to earn substantial credit card sign-up bonuses. All you have to do is spend a certain amount within three months of being approved for the card.
Can You Pay Your Mortgage With a Credit Card?
Yes, but it’s not usually a good idea. Third-party payment providers may accept your card payment and then cut a check to your mortgage servicer, but the convenience fee you'll pay may not be worth it.
One deciding factor in using a credit card to pay a mortgage is having a large-enough credit line to absorb your housing payment on top of any other expenses you typically charge to your card. Another is the value of any potential credit card rewards you might earn. Unless you're chasing a sign-up bonus, these probably won't be higher than the convenience fees.
When Does it Make Sense to Charge Your Mortgage to a Credit Card?
It can make sense to charge your mortgage payment to a credit card when the value of any credit card rewards—cash back, points, or airline miles—is greater than the cost of the transaction convenience fee.
What Are the Downsides of Using a Credit Card to Pay Your Mortgage?
The cost of the convenience fee is the most immediate downside of using a credit card to pay your mortgage. Another issue, often overlooked, is that paying your mortgage with a credit card can dramatically increase your credit utilization and hurt your credit score.
Most important, credit cards usually have higher interest rates than mortgages. If you charge your mortgage to your credit card, then carry a credit card balance from month to month, you'll effectively make your mortgage payments much more expensive than they need to be.
Can I Pay My Mortgage Online?
It's common these days for mortgage servicers to accept online payments directly through their websites. Check your mortgage statement for the company's official website. Then, register for an online account and connect your checking account. Make sure to enroll several days before your payment is due since it may take that long for your accounts to link up. Once the sign-up process is complete, you'll be able to schedule your payment.
Alternatively, your checking account may offer an online bill-pay service that you can use to pay your mortgage. Make sure to find out how far in advance you need to schedule your payment for your loan servicer to receive it on time.
The Bottom Line
Only under limited circumstances will the average person potentially benefit from charging mortgage payments to a credit card. First, you’ll need to find a third-party payment processor that lets you use your credit card to pay your mortgage company. Second, you’ll need to earn credit card rewards that exceed the payment processing fee. Third, you’ll need to pay your credit card balance in full, ideally even before your statement is issued, to avoid paying interest and possibly hurting your credit score. If you can do all of these things, then paying your mortgage with a credit card might pay off.