Introduction

Paying your mortgage with a credit card might seem like a convenient option, especially if you’re looking to earn rewards or manage cash flow. However, this approach comes with significant risks and costs that you should consider carefully. In this article, we’ll explore the methods available for paying your mortgage with a credit card, the potential drawbacks, and alternative solutions to help you manage your mortgage payments effectively.

How to Pay Your Mortgage with a Credit Card

While mortgage loan servicers typically do not accept credit card payments directly, there are a few workarounds you can use:

1. Use a Third-Party Service

Some third-party services, like Plastiq, act as intermediaries by accepting your credit card payment and then sending a check or ACH transfer to your mortgage servicer. However, these services often charge a transaction fee (e.g., Plastiq charges 2.85%) and may only accept certain credit cards.

2. Buy a Money Order

You can purchase a money order with your credit card and then deposit it at your bank or send it to your mortgage servicer. Be aware that money orders usually have a $1,000 limit and may incur fees. Additionally, some merchants do not accept credit cards for money orders, and your card issuer might treat the transaction as a cash advance, which can be costly.

3. Transfer a Balance to Your Bank Account

Some credit cards allow you to transfer a balance to your bank account. You can then use these funds to pay your mortgage. However, balance transfers typically come with fees (3% to 5% is common) and may accrue interest based on your card’s balance transfer APR.

4. Get a Cash Advance

Another option is to take out a cash advance with your credit card. You can use the cash to buy a money order or cashier’s check, or deposit it and pay by check or electronic transfer. Cash advances often come with fees and start accruing interest immediately. Additionally, your cash advance limit may be lower than your credit limit.

Should You Pay Your Mortgage with a Credit Card?

There are two main reasons people consider using a credit card to pay their mortgage: earning rewards or managing cash flow. However, there are several factors to consider before taking this step:

Fees

Third-party services and money order retailers may charge fees. Additionally, your credit card may have fees for balance transfers and cash advances. These fees can add up quickly, making this option expensive.

Interest

If you cannot pay off your credit card balance in full each month, your purchases and balance transfers may accrue interest. Cash advances often have higher interest rates that start accruing immediately.

Rewards

While you might be hoping to earn credit card rewards, the fees associated with using your credit card for mortgage payments often outweigh the rewards you can earn.

Promotional Interest Rate Offers

Some credit cards offer promotional 0% APR on purchases or balance transfers. However, you need to read the terms carefully and ensure you can pay off the balance before the promotional period ends.

Credit Score Impact

Using a credit card to pay your mortgage can lead to a high credit utilization ratio, which can negatively impact your credit score. This could limit your borrowing options in the future.

Alternatives to Using a Credit Card for Your Mortgage

If you’re struggling to afford your mortgage payment, consider these alternatives:

Contact Your Mortgage Servicer

Reach out to your mortgage servicer before missing a payment. They may offer a temporary repayment plan with a lower monthly payment or a mortgage modification if you’ve experienced a significant hardship.

Mortgage Forbearance

Your mortgage servicer may discuss putting your mortgage into forbearance, allowing you to temporarily reduce or stop making payments.

Housing Counselor Assistance

Use the Consumer Financial Protection Bureau’s housing counselor tool or call the Homeowners HOPE Hotline to get help from a housing counselor. They can suggest different options to help you stay in your home.

Monitor Your Credit Report and Score

It’s essential to monitor your credit while repaying your mortgage. A good payment history and high credit score can help you refinance your mortgage to lower your interest rate, decrease your monthly payment, or get cash out. You can check your Experian credit report for free and sign up for free FICO® Score monitoring.

Conclusion

While paying your mortgage with a credit card might seem like a viable option, the associated fees, interest rates, and potential impact on your credit score make it a risky choice for most people. Instead, explore alternative solutions and seek assistance if you’re struggling to make your mortgage payments.

At O1ne Mortgage, we’re here to help you navigate your mortgage needs. Contact us at 213-732-3074 for personalized mortgage services and expert advice. Let us help you find the best solution for your financial situation.