Can I Make a Mortgage Payment With a Credit Card?

Many people consider using a credit card for significant expenses like mortgage payments. This idea often appeals to individuals seeking convenience, aiming to earn credit card rewards, or needing financial flexibility. While directly paying your mortgage lender with a credit card is generally not an option, workarounds exist that involve additional steps and considerations. Understanding these methods and their associated costs is important before attempting such a transaction.

Using Third-Party Payment Services

Most mortgage lenders do not accept direct credit card payments, primarily due to the processing fees they would incur. This means you typically cannot simply use your credit card at your lender’s payment portal. Instead, the primary method for making a mortgage payment with a credit card involves using a third-party payment service.

These services act as intermediaries, charging your credit card for the mortgage amount and then remitting the payment to your mortgage lender. The payment to your lender is usually sent via electronic transfer, such as an ACH payment, or by mailing a physical check. Platforms like Plastiq are examples of services that facilitate these transactions. To use these services, you typically create an account, link your credit card, and provide your mortgage lender’s payment details. Some credit card networks, like Visa and American Express, may have restrictions on their use for mortgage payments through certain third-party services.

Fees and Charges Involved

Utilizing a credit card for mortgage payments through third-party services comes with various fees and potential charges that can significantly increase the overall cost. The third-party service typically charges a transaction fee for facilitating the payment. This fee is often a percentage of the payment amount, commonly ranging from 2.5% to 3%. For example, a $2,500 mortgage payment with a 2.9% processing fee would add an extra $72.50 to that month’s expense.

Another significant concern is the possibility of your credit card issuer treating the transaction as a cash advance. While dedicated bill payment services aim to process payments as purchases, some credit card companies may classify such transactions as cash advances. Cash advances typically incur immediate fees, often 3% to 5% of the amount or a flat minimum fee, whichever is higher, and interest begins accruing immediately without a grace period.

If the credit card balance used for the mortgage payment is not paid in full by the due date, standard credit card interest rates will apply. These rates are considerably higher than mortgage interest rates, with average credit card Annual Percentage Rates (APRs) often ranging from 20% to 25%. Carrying a balance means that the interest charges can quickly outweigh any perceived benefits, making the mortgage payment substantially more expensive.

Credit Card Rewards

The prospect of earning credit card rewards, such as cashback, points, or miles, is a common motivation for considering this payment method. While earning rewards on mortgage payments through third-party services is possible, it is crucial to carefully evaluate whether the value of the rewards outweighs the associated fees.

A straightforward calculation involves comparing the percentage of rewards earned against the service fee. If a credit card offers 2% cashback, but the third-party service charges a 2.5% fee, you would effectively be losing money on the transaction. It is important to understand the redemption value of your points or miles, as some travel points may offer a higher value per point than simple cashback.

Paying a mortgage with a credit card might be financially advantageous when striving to meet a minimum spending requirement for a large sign-up bonus on a new credit card. If the value of the one-time bonus significantly exceeds the processing fees incurred, it could be a strategic move. However, for ongoing monthly payments, the recurring fees typically erode or eliminate the value of regular rewards, making it an impractical long-term strategy for most individuals.