Can You Use a Credit Card to Pay Your Mortgage?

Many homeowners wonder if they can pay their mortgage with a credit card. While using credit card benefits for such a large payment may seem appealing, the process involves specific considerations beyond a typical transaction. Understanding the available methods and their financial implications is important for anyone exploring this possibility.

Methods for Credit Card Mortgage Payments

Directly paying a mortgage lender with a credit card is rarely an option, as most mortgage servicers do not accept credit card payments due to the high processing fees involved. Instead, individuals typically rely on third-party payment services to facilitate these transactions. Companies such as Plastiq act as intermediaries, allowing users to charge their mortgage payment to a credit card. The service then remits the payment to the mortgage company, usually via check or electronic bank transfer.

These third-party platforms generally accept major credit card networks, though some may have limitations, such as not accepting certain card types like Visa or American Express for mortgage payments. Other indirect methods exist, including purchasing money orders with a credit card or utilizing cash advances and balance transfers to generate funds. These alternative approaches often come with their own restrictions and costs, such as daily transaction limits for money orders or immediate interest accrual on cash advances.

Associated Costs and Financial Implications

Using a credit card to pay a mortgage introduces additional costs that can increase the effective payment amount. Third-party payment services typically charge a transaction fee, ranging from 2.85% to 2.9% of the payment amount. For instance, a $2,000 mortgage payment could incur an additional fee of $57 to $58. This percentage-based fee applies to each transaction, accumulating over time.

Beyond these service charges, the primary financial implication arises if the credit card balance is not paid in full immediately. Average credit card annual percentage rates (APRs) can range from 20% to over 25%. If a $2,000 mortgage payment accrues interest at, for example, 22% APR, the interest charges alone could quickly outweigh any potential benefits. Methods like balance transfers typically involve an upfront fee, commonly between 3% and 5% of the transferred amount, adding another layer of cost.

Important Factors to Weigh

Individuals might consider paying their mortgage with a credit card to earn rewards, such as cash back or travel points, or to manage short-term liquidity challenges. While some credit cards offer flat-rate cash back rewards, often between 1.5% and 2%, or higher rates for specific spending categories, the transaction fees charged by third-party services usually negate these earnings. For example, a 2% cash back reward on a payment with a 2.9% service fee results in a net loss of 0.9%. For rewards to be beneficial, the reward rate must exceed the processing fee.

A primary risk involves the potential impact on one’s credit score. Credit utilization, the amount of credit used compared to total available credit, plays an important role in credit scoring models. Experts generally advise keeping credit utilization below 30% to maintain a healthy credit score, with lower percentages often correlating with higher scores. A large mortgage payment charged to a credit card can drastically increase utilization, potentially lowering the score. If the credit card balance is not paid off promptly, high interest rates can lead to accumulating debt, creating financial instability and making it harder to meet future financial obligations.