Can You Make a Mortgage Payment With a Credit Card?

It is generally not possible to directly pay a mortgage with a credit card through a lender. Most mortgage servicers do not accept credit card payments due to substantial transaction fees. However, homeowners sometimes explore indirect methods to use a credit card for mortgage payments, driven by a need for temporary financial flexibility or a desire to earn credit card rewards. These indirect approaches often come with additional costs and potential risks that warrant careful consideration.

How Mortgage Payments and Credit Cards Typically Interact

Mortgage lenders and servicers generally do not accept direct credit card payments for several reasons. A primary factor is the significant processing fees associated with credit card transactions, which can range from 2% to 3% or more of the transaction amount. For a large payment like a mortgage, these fees would represent a substantial cost to the lender, eroding their profit margins and potentially not covering the full payment due.

Beyond the fees, mortgage lenders also face operational challenges and financial risks. The potential for chargebacks, where a cardholder disputes a transaction and the funds are returned, poses a risk to the lender’s cash flow and administrative burden. Mortgage payments typically involve large sums, making the financial exposure from chargebacks considerable.

Common methods for submitting mortgage payments include Automated Clearing House (ACH) transfers directly from a checking or savings account, physical checks, or online bill pay services that draw funds from a bank account. These traditional payment channels are preferred because they are reliable and do not involve the high transaction fees or chargeback risks associated with credit card networks.

Methods for Using a Credit Card to Pay Your Mortgage

Despite direct credit card payments not being widely accepted by mortgage lenders, several indirect methods allow homeowners to use their credit card for this purpose.

One common approach involves third-party payment services, such as Plastiq. These services act as intermediaries, charging a credit card for the mortgage amount and then sending an electronic payment or a physical check to the mortgage lender on the cardholder’s behalf. The process typically involves setting up an account, providing the mortgage lender’s details, and initiating the payment. While Plastiq generally accepts Mastercard and Discover for mortgage payments, some card issuers, including Visa and American Express, may have restrictions.
Another method involves obtaining a cash advance from a credit card. A cash advance allows a cardholder to withdraw cash directly from their credit line, often through an ATM or a bank teller. The cash can then be used to make the mortgage payment via a traditional method like a check or money order. Cash advances are subject to immediate, higher interest rates compared to standard purchases, and they often incur a separate cash advance fee.
Some credit card companies offer balance transfers that can be directed directly to a checking account. This process allows funds from a credit card’s credit limit to be deposited into a bank account. Once the funds are in the checking account, they can be used to pay the mortgage as a regular bank transfer. Similar to cash advances, balance transfers typically involve a transfer fee and may accrue interest from the transaction date.
Additionally, some credit card accounts provide convenience checks, which are checks linked to the cardholder’s credit line. These checks can be written and used for various payments, including a mortgage. When a convenience check is cashed or deposited, the amount is drawn from the credit card’s available credit, functioning similarly to a cash advance or balance transfer. These checks often carry associated fees and higher interest rates that begin accruing immediately upon use.

Costs and Considerations for Credit Card Mortgage Payments

Using a credit card for mortgage payments, even through indirect means, involves several financial implications.

Transaction Fees and Interest

Third-party payment services typically charge a transaction fee, often ranging from 2.85% to 2.9% of the payment amount. For a mortgage payment of $2,500, a 2.85% fee would add $71.25 to the cost, totaling $855 annually if used monthly. This fee can quickly outweigh any rewards earned, making it an expensive way to pay.

Cash advances and balance transfers incur their own costs. Cash advance fees commonly range from 3% to 5% of the amount withdrawn, often with a minimum fee, such as $10. For a $2,500 cash advance, a 5% fee would be $125. Credit card interest rates for cash advances and balance transfers are higher than for regular purchases, and interest begins accruing immediately, without a grace period. Annual Percentage Rates (APRs) on credit cards can be 20% or more, significantly higher than mortgage interest rates, which could lead to substantial interest charges if the balance is not paid in full quickly.

Credit Utilization Impact

The impact on credit utilization is another significant consideration. Credit utilization refers to the amount of credit used compared to the total available credit. Lenders and credit scoring models, such as FICO and VantageScore, recommend keeping credit utilization below 30% to maintain a healthy credit score. A mortgage payment, which can be thousands of dollars, can consume a large portion of a credit limit, drastically increasing the utilization ratio. A high credit utilization ratio signals increased risk to lenders and can negatively affect a credit score.

Risk of Accumulating Debt

Relying on a credit card for mortgage payments also carries the risk of accumulating substantial debt. If the credit card balance cannot be paid off in full each month, the high interest rates will cause the debt to compound rapidly, potentially leading to a cycle of increasing debt. This approach can worsen a financial situation if not managed with extreme discipline, potentially leading to long-term financial strain.

Alternatives to Using a Credit Card for Mortgage Payments

Homeowners facing financial challenges that lead them to consider using a credit card for mortgage payments have several financially sound alternatives.

Proactive communication with the mortgage lender is a primary step. Lenders can offer solutions like mortgage forbearance, temporarily pausing or reducing payments due to hardship. Loan modification is another option, permanently altering terms to make payments more affordable by lowering interest, extending the term, or adding missed payments to the principal.
Implementing a budgeting and financial planning strategy helps manage mortgage obligations. Reviewing income and expenses identifies areas for reduced spending. A clear budget ensures funds are allocated for essential payments, including the mortgage, before discretionary spending. This avoids situations where a credit card becomes a perceived necessity.
Utilizing an emergency fund is a prudent alternative for unexpected financial difficulties. This savings account covers unforeseen expenses or temporary income disruptions. Financial experts recommend saving three to six months’ worth of essential living expenses, including mortgage payments, in an easily accessible account. These dedicated savings provide a safety net, preventing reliance on high-interest credit options during financial strain.
Seeking financial counseling from non-profit organizations provides valuable guidance. These agencies offer expert advice on managing debt, creating budgets, and exploring options with creditors and lenders. They help homeowners develop a sustainable plan to meet mortgage obligations without incurring additional high-cost debt.
Exploring other sources of income, even temporarily, can alleviate financial pressure. This might involve a side job, selling unused assets, or freelance work. Any additional income directly contributes to covering the mortgage payment, reducing the need for credit cards. This proactive approach stabilizes finances and maintains payment consistency.