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If you like to maximize credit card rewards, then writing a check for your monthly mortgage payment can feel like a huge missed opportunity. Shouldn't there be a way to pay your mortgage with a credit card?
It turns out, there is. In fact, there are three. The catch? They all have extra costs, and only one is likely to earn you any rewards. Here's how to pay your mortgage with a credit card.
Very few, if any mortgage lenders will let you make a mortgage payment with your credit card. Basically, your mortgage is a debt, and your credit card is also a form of debt. Banks typically frown on using one type of debt to pay another.
That being said, there are a few potential workarounds -- all with varying degrees of difficulty. No matter which you choose, be prepared to pay extra fees.
Depending on your mortgage lender, the simplest way to pay your mortgage with a credit card may be to use a third-party payment service. Some traditional lenders accept them, but others don't, so it's worth making a call ahead of time.
One of the more popular mortgage payment processors is called Plastiq. The service acts as a sort of payment exchange. You make a credit card payment to Plastiq equal to your mortgage payment (plus their transaction fee). Then Plastiq sends an electronic payment or paper check to your mortgage lender on your behalf.
You can use these services once or set up automatic payments every month. Fees for third-party mortgage payment services vary by provider. Expect to fork over an extra 2% to 3% of the transaction amount for each monthly payment. For example, Plastiq charges around 2.85% per payment. (Occasional discounts or promotions may be available.)
There are a couple of ways you can use your credit card to make a mortgage payment without involving a third party -- but they're all just as expensive, if not more. For example, you can use your credit card to pull cash out of the ATM. This can then be deposited into your bank account or used to purchase a money order.
In some, now rare, circumstances, you can even use a credit card to buy a money order directly. However, most retailers have stopped accepting credit cards for money order purchases due to fraud and money laundering concerns.
In any case, the transaction will be considered a credit card cash advance. Unfortunately, cash advances have a lot of associated costs.
For one thing, you'll pay a cash advance fee. This can be equal to 5% or more of the total you withdraw. Plus, cash advances start accruing interest as soon as they post, often at a higher interest rate than regular purchases. A don't forget to double-check your cash advance limit -- it will likely be much lower than your regular credit limit.
Besides the fees, you should avoid cash advances if your goal is to earn credit card rewards. Cash advances don't earn purchase rewards at all. They also won't count toward the spending requirement for a credit card sign-up bonus.
Another way to pay your mortgage with a credit card is by using a balance transfer check.
The most common credit card balance transfer involves moving a balance from one credit card to another. However, you can sometimes use a balance transfer check to move money from your credit card to your bank account.
Some new balance transfer credit cards will ship with paper balance transfer checks. You fill them out like any other paper check, then deposit them into your bank account. You can then use the cash to pay your mortgage.
A balance from a check transfer is treated the same as one from a regular card transfer. This means you'll typically be charged a balance transfer fee. These fees can range from 2% to 5% of the total transferred amount. And, unlike regular purchases, balance transfers start accumulating interest right away. The only way to avoid this is to use a credit card with a 0% intro APR balance transfer offer.
Make sure to verify your balance transfer limit with your bank. You may be able to transfer up to your full credit limit -- but you may only get half that. It depends on many factors, including your credit history and your income.
Although a balance transfer check could be helpful in a bind, it's not ideal for rewards maximizers. As with cash advances, balance transfers don't earn credit card purchase rewards. Nor will your balance transfer help you meet a sign-up bonus spending requirement.
Despite the potential costs, there are select cases in which it may make sense to pay your mortgage loan with a credit card. Here's what they are.
The main driver for many folks who use third-party mortgage payment services is credit card rewards. Essentially, if you can earn more in rewards than it costs to use the service, you come out ahead. If you can pay a 2% fee to earn 3% back in rewards, you net a 1% return.
Paying your mortgage with your rewards credit card could also be handy for earning sign-up bonuses. This is especially useful when trying to earn a sign-up bonus that has a large spending requirement you'd otherwise fail to reach. For example, paying $75 in processing fees may seem reasonable if it helps you earn $1,500 in rewards.
In some cases, you may choose to pay your mortgage with a credit card rather than miss a payment. Since missing a mortgage payment can lead to a number of negative outcomes, including late fees, it may make sense to use your credit card in a pinch.
On the plus side, credit cards let you carry a balance from month to month. So, you could pay down your mortgage payment over time. However, this isn't a sustainable cycle. The extra costs and interest fees will add up each month. If you can't repay the balance quickly, you could wind up in a worse financial place than you started.
Credit cards can be a useful way to pay your mortgage -- in some situations. Whether you want to maximize your credit card rewards or avoid paying your mortgage late, be sure to do your research first. The fees and process may be more cumbersome and expensive than they're worth -- or they might be the perfect fit for your situation.
Here are some other questions we've answered:
Yes, but it can be expensive. All methods of paying a mortgage with a credit card involve additional fees.
There are three main ways to make a mortgage payment with a credit card:
Yes, if you use a third-party payment processor, like Plastiq. These processors accept your credit card payment, then issue an electronic payment or paper check to your mortgage lender. Not all lenders accept payments from third-party processors, so it's worth double-checking ahead of time.
Most card issuers treat Plastiq payments as purchases. This means you can earn purchase rewards. The transaction should also count toward a sign-up bonus spending requirement.
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