Can I Use a Credit Card to Pay My Mortgage?

Many homeowners consider using a credit card to pay their mortgage, attracted by the convenience and potential rewards like points or cashback. However, directly paying a mortgage with a credit card is generally not an option for most lenders. Indirect methods exist, but they involve various considerations, including fees and financial implications. Understanding the policies of mortgage lenders and the mechanisms of third-party services is important before exploring this payment avenue.

Mortgage Lender Payment Policies

Most mortgage lenders do not directly accept credit card payments for monthly mortgage obligations. This policy stems from the processing fees that credit card transactions incur for the merchant. These fees, often a percentage of the transaction amount, can significantly reduce the profit margins for lenders on a low-margin product like a mortgage loan. Consequently, lenders prefer payment methods with lower processing costs.

Mortgage servicers commonly accept Automated Clearing House (ACH) transfers, which draw funds directly from a checking or savings account. Other widely accepted methods include:
Personal checks sent via mail
Online bill pay services through banks
Payments made over the phone using a bank account or debit card
In-person payments at branch locations using checks or money orders

Third-Party Payment Services

Third-party payment processing services allow individuals to use a credit card for mortgage payments. They act as intermediaries, bridging the gap between credit card payments and lenders who do not accept them directly. Users pay the third-party service with their credit card, and the service then forwards funds to the mortgage lender via an accepted method.

The process involves creating an account and linking a credit card. Users input lender details, including the loan number, and schedule payments. The service accepts the credit card payment and dispatches funds to the lender, often via ACH transfer or physical check. Some credit card networks, like Visa and American Express, may restrict mortgage payments through certain third-party services.

Fees and Charges of Credit Card Mortgage Payments

Using a third-party service to pay a mortgage with a credit card incurs various fees. The most common is a service fee from the processor, typically 2.85% to 2.9% of the payment. For example, a $2,000 payment could incur a $57 to $58 fee, increasing the total cost. These fees can quickly diminish any earned rewards, such as cashback or points.

Beyond the service fee, credit card issuers may classify the payment as a cash advance. If so, cash advance fees, typically 3% to 5% of the transaction or a minimum of $10, apply. Cash advances usually lack a grace period, meaning interest accrues immediately from the transaction date, often at a higher APR than for regular purchases. This immediate and higher interest can substantially increase the total cost if the balance is not paid in full promptly.

Implications for Your Credit Card and Finances

Using a credit card for a mortgage payment can impact your credit account and overall financial standing. A primary concern is credit utilization, the ratio of credit used to total available credit. A mortgage payment, a substantial sum, can significantly increase this ratio.

Experts recommend keeping credit utilization below 30% for a healthy credit score. A sudden surge in credit utilization from a large payment can negatively affect credit scores, even if paid off quickly. The impact can be immediate as credit utilization is dynamic.

To mitigate risks, pay the credit card balance in full and on time. Failure to do so results in significant interest charges, making the payment more expensive than traditional methods when combined with processing fees. Consistent on-time payments benefit credit history, but carrying a high balance, even temporarily, signals increased risk to lenders.