My husband and I have made a lot of financial progress over the years. We’ve saved huge sums of money for retirement, paid off $50,000 in car loans and student loans, purchased two rental properties (and paid one of them off ) and paid cash for a lot of wants in our lives—things like family vacations, new furniture and home upgrades.
But our biggest accomplishment by far is one that took us years to achieve; we paid off the mortgage on our primary home in 2018, but only after making extra payments for what seemed like forever.
Amazingly, we also earned around $2,000 in credit card rewards by paying off our mortgage early with one simple tool few people even know about. And we did it all without paying any fees.
How we earned rewards paying off the last $100K of our mortgage
While my husband and I used to work in the mortuary industry, we now make a living as full-time bloggers. Our website, ClubThrifty.com, covers topics that range from personal finance to travel and credit card rewards.
In 2015, we started covering topics like how to pay off your mortgage with a credit card. While there are admittedly very few ways to accomplish this feat since mortgage companies don’t tend to accept credit payments directly, there are a few hacks that let you pay your mortgage with plastic.
- You can buy money orders with a credit card and deposit them with your bank toward your mortgage payment, for example.
- But you can also use a third-party service called Plastiq.com to pay bills with credit, including your mortgage payment, rent payment, car loan, utility bills and more.
Currently, Plastiq lets you make mortgage payments with Mastercard and Discover only (not with Chase or American Express). When we paid off our mortgage, they charged a 2.5 percent fee for every payment made—or around $25 for each $1,000 paid toward your home loan. This fee has since climbed to 2.85 percent.
Since you typically don’t earn 2.85 percent in rewards on your spending, using Plastiq to pay your bills with a rewards card is normally a losing proposition. The only exception is if you’re trying to meet a minimum spending requirement to score a huge sign-up bonus. If paying $28.50 or $100 in Plastiq fees lets you earn a sign-up bonus worth $500 or more, then that can make sense.
Plastiq also has a referral program that, at one time, let you earn $1,000 in fee-free dollars for each person you refer. And, when my husband and I began writing about Plastiq on our website, we quickly started racking up referrals and “fee-free dollars.”
By the time we got serious about paying off the mortgage on our primary home, we owed about $100,000. But we also had around $200,000 in fee-free dollars with Plastiq from referring 200 people to the service.
I got a bright idea at this time: Why not pay off our mortgage with Plastiq and earn credit card rewards in the process?
Paying off our mortgage with Plastiq
With $100,000 left on our mortgage balance and plenty of Plastiq referral dollars to pay the whole thing off, what could go wrong? Really, the only issue we had to tackle from there was which credit card to use or sign up for.
While there are many solid Discover and Mastercard credit cards that could be smart to use for this purpose, we ultimately decided to use a rewards credit card we already had—my husband’s Barclaycard Arrival Plus® World Elite Mastercard®.
We chose the Barclaycard Arrival Plus World Elite Mastercard because it earns 2X miles for each dollar you spend. On the redemption side, you can cash in your miles for any type of travel at a rate of 1 cent per point, providing your purchases are at least $100 (10,000 points) or more.
Paying our mortgage through Plastiq was easy, but you do have to allow time for payments to post through the platform. Because payments from Plastiq to my old mortgage provider—Caliber Home Loans—could take up to two weeks, I started the process by paying our mortgage payments one month ahead of time every month.
In the beginning, I tried to pay $3,000 to $4,000 per month toward our mortgage, which was a lot considering the minimum payment on our 15-year loan was around $1,500. A few times, I was able to pay considerably more than that — in the $5,000 to $8,000 range. Because of the way mortgage interest accrues, every big payment I made resulted in a larger percentage of my monthly payment going toward the principal of my mortgage and not interest.
Of course, we always paid our credit card balance in full, which meant we never paid a dime in credit card interest along the way.
Over the course of around 18 months, we paid our mortgage down to the point where our balance was only $20,000. At that moment, we made the call to pay the remaining balance off in one final lump sum.
Note: The Barclaycard Arrival Plus World Elite Mastercard is no longer available to new applicants.
Paying off our mortgage early—what did we get?
Paying a mortgage with a credit card isn’t for everyone. In fact, many experts discourage it. Luckily for us, everything worked out. Making the final payment toward our mortgage was a euphoric feeling. We suddenly went from owing money on our home to owning it outright.
We’re still required to pay property taxes and homeowners insurance, but it’s a nice feeling to no longer have mortgage payments to cover. We also earned an effective 3.75 percent on the money we prepaid since we saved that much in interest.
Along the way, we also earned 200,000 Barclays miles for paying off $100,000 in loan payments (and we did it all without paying the 2.5 percent fee thanks to the free payments earned via referrals).
How did we spend our rewards? We paid for the bulk of an Adriatic cruise (our cruise was closer to $2,500) by cashing in 200,000 Barclays miles for $2,000 in travel credit. Our cruise departed out of Venice, Italy, with stops in Southern Italy, Greece and Croatia.
But the most important benefit we gained has nothing to do with money or rewards. The freedom we earned by paying off all our debt is a gift that we know will pay off the rest of our lives. No matter what happens, we have a home that’s fully paid for — one we can’t lose due to market downturns or lean financial times.
Paying your mortgage with a credit card: Are there risks?
While I was able to find a workaround that let me pay off my mortgage without any fees, those deals are hard to come by in the real world. Most of the time, there are huge drawbacks that come with paying your mortgage with a credit card, and these drawbacks make using plastic to cover mortgage payments much riskier than it might seem.
If you’re thinking of paying your mortgage with a credit card, some of the pitfalls to watch out for include:
- High interest rates: The average credit card interest rate is currently 16 percent, whereas the average mortgage rate for a 30-year home loan is only 3.24 percent. If you need to pay off your mortgage over time, you’re almost always better off paying interest on the home loan you have.
- Fluctuating interest rates: Also keep in mind that your home mortgage interest rate might be a fixed rate, in which case it would never go up. Credit cards come with high variable rates, on the other hand, so your interest rate can go up and down over time.
- Utilization problems: When you move mortgage debt to a revolving line of credit like a credit card, you have the potential to cause your credit utilization rate to rise. Since your credit utilization makes up 30 percent of your FICO score, paying your mortgage with a credit card can cause your credit score to drop in a hurry if you carry a balance.
- Fees: Platforms that let you pay your mortgage with a credit card will always charge fees to do so. These fees eat away at any rewards you might earn, making the entire experience a losing proposition.
Pros of paying your mortgage with a credit card
There are some potential advantages that can come with paying your mortgage with a credit card, which could include:
- The potential to earn more in rewards than you pay in fees and interest
- Buying some time before your mortgage payment is due
- Paying with plastic to avoid defaulting on your mortgage
- Possibility to charge your mortgage payments to a credit card that offers 0 percent APR for a limited time
Cons of paying your mortgage with a credit card
The advantages above are worth considering, but there are risks that come with paying your mortgage with a credit card that you shouldn’t ignore. The big ones include the following:
- The potential for long-term debt
- Paying more interest than you could ever receive in rewards points
- Having to pay third party fees to cover your mortgage payment with plastic
- The potential for damaging your credit score
The bottom line
At the end of the day, you should probably make your mortgage payment the old fashioned way. You could earn some rewards when you pay your mortgage with a credit card, but the additional risks, interest and fees almost always make paying your home loan with plastic a bad idea.
When it comes to racking up points and miles, most people would be better off figuring out which expenses they can pay with credit without any fees. As always, you’ll also be a lot better off if you only charge purchases you can afford to repay right away, and before interest accrues. Earning rewards with a credit card can be a lot of fun, but racking up high-interest debt can ruin your plans in a hurry.