Credit cards offer several benefits for users, including points and the ability to pay off purchases over time. That ability to offset payments over a lengthy period is great for major purchases. But what about rent or mortgages? Can you use a credit card to pay your mortgage or rent? Here’s how to pay your mortgage with a credit card – and why it might not be the best idea.
How to Pay Your Mortgage with a Credit Card
Making mortgage payments with a credit card is a relatively simple process. There are various services that allow credit card users to make payments for almost anything with their cards – with Plastiq being the most popular service.
Plastiq is a unique service that individuals and businesses make payments with credit cards for various transactions not usually allowable with cards. These payments include:
- Rent
- Mortgages
- Bills
- Taxes
- Tuition
The model Plastiq uses is very similar to other bill pay options. Users enter the information of the person (or company) they want to pay (including their direct deposit info) and their credit card and personal details. The service than pays the recipient with the individual’s credit card.
The benefit of Plastiq is that payments are registered on credit card bills as “payments” and not a cash advance. Cash advances typically have very high APR and associated fees – usually around 5% of the transaction cost. Plastiq, on the other hand, charges a fee of 2.85% of the transaction – offering significant savings for the user versus a cash advance.
Other options for paying mortgages or rent with a credit card include:
- GoCardless
- Thryv
- Melio
- Bravo
- PlacePay
- RadPad
Are There Benefits to Paying Your Mortgage with a Credit Card?
Using a credit card for things like mortgage payments has several practical benefits. These benefits include:
Earning Rewards
One of the great features of many credit cards is the rewards they offer. Many cards provide additional rewards for purchases in select categories, such as groceries, utilities, or travel. While making mortgage payments isn’t a bonus category, many rewards cards offer a minimum reward for simply using the card. Typically, this is a single point or 1% cash back.
Making a mortgage payment with your card can therefore amount to a significant amount of cash back or rewards points, which can then be applied towards future travel, statement credits for paying down the card’s balance, or other awards.
Using credit cards for mortgage payments can also help you reach a lofty sign-up bonus. Some premium travel rewards credit cards, such as the Platinum Card from American Express, feature introductory bonuses that require a heavy spend within a set timeframe. These bonuses can be worth thousands of dollars, making them an enticing proposition. Using a credit card for your mortgage might be one way to reach these goals and get your hands on those lucrative rewards points.
Avoiding Financial Difficulties
Avoiding foreclosure or late payments isn’t a great reason for putting mortgage payments on your credit card, but it is an option. Before making your mortgage payment through a service like Plastiq, however, always be sure to contact your mortgage lender and discuss forbearance options to avoid late payments – it is a much more advisable option in the long run.
Why Putting Mortgage Payments on Your Credit Card Is Not Necessarily a Good Idea
While paying your mortgage with a credit card isn’t too complicated from a practical standpoint, it might have unforeseen problems down the road. The most obvious issue arising from making mortgage payments with a credit card is the negative impact it has on your credit score.
Credit Utilization
Using a credit card for expensive charges, like mortgage payments, can quickly raise your credit utilization. Credit utilization, or how much of your available credit you actually use, accounts for about 30% of your FICO credit score, ranking behind only payment history (35%) as the biggest impactor of your overall credit health.
Placing a large purchase (or mortgage payment) on your credit cards can make your credit utilization balloon, leading to a drop in your credit score. Generally speaking, any credit use above 30% on a credit line will harm – not hurt – your credit score, while keeping credit use below 30% is key to maintaining a good credit score.
Interest
Because credit cards charge interest, putting a mortgage payment on your card might result in additional interest on top of what your mortgage already charges. And since mortgage payments may run into the thousands of dollars, it might be challenging to pay off the entire balance due on your credit card statement.
Fees
While services like Plastiq make it possible to pay your mortgage with a credit card, these services are not free. Many services charge a processing fee of around 3% for using credit cards for services they aren’t intended for – such as mortgage payments. Before placing a mortgage payment on your credit card, carefully consider if the benefits outweigh the additional costs of processing and fees.
Conclusion
Yes, you can pay your mortgage with a credit card – but should you? There are plenty of great reasons to pay your mortgage or rent with your preferred card but be wary of the potential adverse impact it can have on your finances and credit score. Before making any payments for housing with a card, always be sure to have the money available to pay off that charge. If you don’t have the money, always talk to your mortgage lender to discuss other options, including forbearance.
Related Article: Can You Pay Your Taxes with a Credit Card?
