How to Earn Points Paying Your Mortgage

Earning rewards on significant monthly expenses like mortgage payments is appealing to many consumers. While directly paying a mortgage with a credit card is generally not straightforward or advisable, alternative strategies exist. This article explores indirect methods to accumulate points or other rewards related to housing expenses.

Direct Mortgage Payment Limitations

Most mortgage lenders do not directly accept credit card payments. Mortgage servicers incur merchant processing fees, which can range from 2% to 3.5% of the transaction amount, when accepting credit cards. These fees reduce profitability and would be passed to the borrower, negating any potential rewards.

Lenders also face regulatory compliance burdens and increased chargeback risk with credit card transactions. Unlike retail purchases, a mortgage payment is a debt transfer, making it less suitable for credit card processing from a risk management perspective. Any accompanying transaction fees make direct credit card mortgage payments impractical and costly for the homeowner.

Leveraging Third-Party Payment Platforms

Third-party payment platforms offer an indirect method to use a credit card for mortgage payments. Services like Plastiq or Melio act as intermediaries, allowing users to charge their mortgage payment to a credit card. The platform then converts this into a check or electronic transfer (ACH) sent to the mortgage lender. These platforms charge a convenience fee for their service, commonly ranging from 2.5% to 3.5% of the payment amount.

To use these services, individuals must first create an account on the chosen platform. Next, the mortgage lender needs to be added as a payee, requiring details such as the lender’s name, account number, and payment address. Users then securely link their credit card information to the platform.

Once set up, a payment can be initiated by specifying the mortgage amount and desired payment date. The platform charges the credit card for the payment plus its processing fee. Funds are then disbursed to the mortgage lender via check or ACH transfer, a process that can take 3 to 10 business days. Some platforms may have limitations on the types of credit cards accepted for mortgage payments.

Strategic Use of Credit for Other Major Bills

An alternative approach involves using credit cards for other substantial, recurring household expenses that accept card payments, preserving cash for direct mortgage payments. Many large bills offer credit card payment options without high fees. These include property taxes, homeowner’s insurance, car insurance, and various utility bills like electricity, gas, and internet services.

Property taxes can be paid with a credit card through municipal or county websites, though a processing fee, around 2% to 2.5%, may apply. Homeowner’s and car insurance premiums are widely accepted via credit card, with many insurers not imposing additional fees. Utility providers also accept credit card payments, though convenience fees are common.

By strategically paying these large, non-mortgage bills with a rewards credit card, the cash that would have been allocated for them remains in the bank account. This effectively frees up funds to cover the mortgage payment directly from a checking or savings account. This strategy emphasizes the importance of paying the credit card balance in full and on time each month to avoid interest charges, which would quickly erode any rewards earned.

Assessing Financial Viability

Determining the financial benefit of earning points on mortgage-related payments requires calculating the net gain. This involves subtracting total fees paid from the estimated value of points earned. The formula is: (Value of Points Earned) – (Total Fees Paid) = Net Gain or Loss.

The value of credit card points varies significantly based on the redemption method. Many points programs offer a baseline value of 1 cent per point ($0.01/point) for cash back or statement credits. Points redeemed for travel can yield higher values, ranging from 1.25 cents to over 2 cents per point. Understanding a credit card’s point valuation is important for an accurate assessment.

When considering fees, all associated costs must be factored in. This includes third-party platform fees, ranging from 2.5% to 3.5%, and any processing fees imposed by other billers, which can be up to 5%. Any annual credit card fees should also be included. A simple breakeven analysis ensures the value of rewards received exceeds these cumulative fees.

Any credit card balance incurred through these strategies must be paid in full by the due date. Carrying a balance and incurring interest charges will negate any rewards earned, making the strategy financially unsound.