Should I pay my mortgage with a credit card?


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So you want to rack up tons of credit card points, and looking over your monthly expenses one big payment sticks out: your mortgage. And now you’re wondering, maybe I should pay the mortgage with my credit card?

While this might seem like a clever idea, it’s become very difficult to find a mortgage servicing company that will let you pay with a credit card. And even if you do, it’s not the soundest financial decision, because you risk rapidly inflating your credit card balance.

Paying a mortgage with a credit card

Before the housing meltdown changed the way the mortgage industry operates, people would go through a third-party service to make mortgage payments.

Frequently, homeowners used these services including credit cards to manage a mortgage they could not afford rather than to earn credit card points. In other words, it was an act of desperation.

More recently, one of the easiest ways to pay a mortgage with a credit card and rack up points was by using American Express Serve, a reloadable prepaid debit card account.

The prepaid account allowed users to load money onto the card and pay monthly bills or buy things. American Express Serve helped many people skirt the issue of mortgage companies that would not take credit card payments.

In 2016, American Express cracked down on the accounts of many people who regularly loaded up Serve cards to pay mortgages, going so far as to freeze some accounts. Other cards that some people used to pay mortgages — including REDbird, the Target prepaid card — also have stopped allowing the practice.

Pitfalls to watch out for

A few mortgage companies still allow homeowners to make payments with credit cards, so check on whether yours is. If so, ask what fees are being charged. Specifically, look for “convenience fees” tacked on to the transaction.

Credit card issuers frown on regular large expenditures, not only because of the amount of rewards they must pay, but because criminals conduct illegal activities using credit cards. The convenience fees are their way of discouraging these activities.

If you are determined to use a credit card to make a mortgage payment but your credit card company’s fees are too high to make it money smart, you can turn to a third-party servicer that will accept credit card payments and, in turn, pay your mortgage. Services like Tio charge a fee of 2 percent to 3 percent, depending on the size of your mortgage.

The bottom line

Charging expenses on a credit card is the same as taking out a loan. Taking out one loan to pay for another loan is a bad strategy. Even if you plan to pay off your credit card balance off in full each month, unexpected expenses crop up that temp you to retain a balance from time to time.

If you find a way to pay your mortgage with a credit card, you should research how it could impact your financial health. Find out how many points you’ll earn, how much you might have to pay a third party in fees for its services and whether they have a credit limit that would be eclipsed by a mortgage payment. But most of all, consider simply paying your mortgage the old fashion way: by check or recurring direct debit, eliminating the chance you end up with a big balance and lots of interest fees.