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Yes, putting that monthly mortgage payment on a credit card could earn you rewards — but here’s why it isn’t a good idea.
Many of us put the majority of our expenses on credit cards, racking up rewards before paying off our balances. If you’re a homeowner, your mortgage payment is often one of your biggest monthly expenses — so you may have asked yourself whether it’s possible to pay your mortgage with a credit card, too.
According to the United States Census Bureau’s 2017 American Housing Survey, the median monthly mortgage payment for U.S. homeowners is $1,100. That’s a lot of money that could be earning travel rewards or cash back. Plus, being able to put your mortgage payment on a credit card could be helpful if you’re temporarily short on cash.
So why not do it? There are ways to pay your mortgage with a credit card — but we don’t recommend them. Here’s why.
Paying a mortgage with a credit card requires a third-party service — and that comes with a fee
Most lenders and mortgage companies aren’t going to let you pay your mortgage with a credit card. Why? Because they get stuck with the credit card transaction fees. Lenders lose around 2-3% of your mortgage payment to fees when you pay via credit card, so you can understand why that typically isn’t an option.
Other companies, however, are ready to help. Multiple third-party services allow you to pay your mortgage via credit — or pay anything via credit, really. In these cases, you make your mortgage payment to the service and they send a check or bank transfer to your mortgage company on your behalf. However, these services are not free. You’ll pay a 2-3% fee per transaction, which means that your $1,100 monthly mortgage payment could cost you an extra $33 in fees.
If your credit card offers rewards at a higher percentage than the fees charged by the third-party service, you could still come out ahead. But you probably won’t. Most high-reward credit cards match their highest rewards to a specific category of spending — travel, restaurants, etc. — and “third-party credit card payment services” is not usually a top rewards category.
Paying a mortgage with a credit card could land you further in debt
Perhaps you start the month with the best of intentions — but you end the month unable to pay off your credit card balance. If you put a mortgage payment on your credit card and don’t pay it off in full at the end of your billing cycle, you’re going to get hit with a lot of credit card interest. Some credit cards offer 0% interest for a limited amount of time, but that still isn’t a good reason to put your mortgage on a credit card. When the 0% intro APR runs out, will you have successfully paid off those mortgage payments, or will you find yourself deeper in debt with new interest charges every month?
It’s a much smarter move to pay your mortgage in cash, even if money is tight — that way, you don’t end up digging yourself a debt hole that you can’t escape. If you are having trouble making your monthly mortgage payment, visit the U.S. Department of Housing and Urban Development’s Mortgage Assistance Options website to learn how you can modify or refinance your loan.
Your mortgage is one of your most important bills, so pay it first
Credit cards are good for making day-to-day purchases, but your mortgage isn’t a day-to-day purchase. It’s one of the most important bills you pay each month, so make sure you have enough cash in your bank account to pay it off before you start putting airfare or restaurant spending on your credit card.
It is true that not paying your mortgage with a credit card might mean missing out on some airline miles or gift cards. But when you pay your mortgage, what you’re really doing is investing in yourself. A fully-paid-off home is worth a lot more than those credit card points — and the security of knowing that you can pay your mortgage every month without going into additional debt is invaluable.
So don’t pay your mortgage with a credit card. Pay it in cash — and reap the rewards.
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