If you’re the kind of person who makes the most of their cash-back and credit card rewards, then writing a check for your mortgage instead of paying with a credit card can feel like you’re potentially throwing a free trip, rental car discount or even cash out the window!
But – while in some cases it is possible to pay your mortgage with a credit card – it doesn’t mean that you should.
Sure, you might be able to earn some big credit card rewards, or even sidestep a late payment, but the fees and the negative impact it could have on your credit score aren’t worth it.
To top it off, some mortgage lenders won’t accept credit cards as a form of payment.
But, if you’re still curious about paying your mortgage with a credit card, check out all the things you’ll need to take into consideration before you enter those digits.
Why Pay for a Mortgage With a Credit Card?
We’ve compiled a few reasons why someone might be tempted to use their credit card to pay their mortgage, and we consider whether it’s worth it or not. (Spoiler: It usually isn’t!)
To rack up credit card rewards
There are two main types of credit card rewards: the sign-on bonus and continual rewards.
With a sign-on bonus, you might get an extra $200 for spending $2,500 within the first 3 months of getting the card. With continual rewards, you might get 2% – 3% cash back with each purchase you make.
Since a mortgage payment is usually higher than your average purchase, you could theoretically rack up a ton of rewards by using your card to make your mortgage payment.
Plot twist: Most mortgage lenders won’t allow you to pay directly with a credit card; you’d have to use a method that allows you to pay indirectly. Indirect payments cost so much in fees that they would outweigh any rewards you might earn.
To dodge a late mortgage payment
Most mortgage payments are due on the first of the month. Many lenders provide a grace period to allow borrowers to make their payment up until the 15th before they get charged a late fee. A 15-day grace period is standard but speak with your lender to make sure.
Come the 16th, if the payment still hasn’t arrived, lenders will charge late fees. Lenders typically won’t report your account to the credit bureaus until your payment is 30 days late.
If you need more than 15 days to pay your mortgage and want to avoid late fees and damage to your credit score, you could make the mortgage payment with your card on the 14th and technically give yourself 25 more days to make your payment.
FYI: This only “works” if the payment processor’s fee costs less than your lender’s late fee and you manage to pay off the card’s balance in full by its due date.
To avoid foreclosure
We 100% understand that just the thought of losing your home is scary. We also 100% get why you might be tempted to make your mortgage payment with a credit card if it means keeping a roof over your head. But, trust us, you’ve got other options.
If you’re facing foreclosure (a process that takes banks 3 – 6 months to start after your first late payment), your financial situation is probably already too fragile to take on the added debt of a mortgage payment on a credit card.
Instead, consider reaching out to your lender to establish a plan to help you avoid foreclosure.
How To Pay Your Mortgage With a Credit Card
Most mortgage lenders won’t accept credit cards as a form of payment because they understand that they’d be doing their borrower a disservice.
From the lender’s perspective, when a borrower pays their mortgage with a credit card, they’re essentially trading debt that’s lower interest and sometimes tax deductible (hint: your mortgage debt) for high-interest debt that isn’t tax deductible (hint: your credit card debt), which could hurt the borrower financially in the long run.
If you’ve weighed the pros and cons and you still want to explore using a card to pay your mortgage, here are a few methods you can use:
Third-party payment service
Some companies will let you use a credit card to pay for almost anything – including a mortgage.
These services take your credit card payment and then send a check to your lender. Simple enough, but there are some downsides.
Most services will charge a transaction fee that ranges between 1.55% and 3.5%. You might be able to find a referral code to help save some money on the transaction fee, but you can only use the discount on your first transaction. There won’t be any money-saving referrals to help you if you plan on using this method in the future.
Keep in mind that some services will only accept certain types of credit cards, which could potentially limit your options.
Buy a money order
Like a check, a money order is a paper form of payment. You can buy one with cash, a traveler’s check or a debit card. After buying your money order, you can either deposit it at your bank or send it directly to your lender.
Money orders have a $1,000 limit, and you might be charged a fee for each money order you buy. Be forewarned, many money order providers won’t accept a credit card.
Get a cash advance
A cash advance is a service most credit card issuers provide. It allows you to take out cash up to your credit limit at an ATM or over-the-counter at a bank. You could take out an advance on your card and then buy a money order or cashier’s check to pay your mortgage.
You could also deposit your cash advance and pay by check or through an online transfer.
However, the cash advance APR (the interest and fees charged on the money you’ve withdrawn) is usually higher, which could make this method significantly more expensive for you.
And there’s no difference between a purchase or a cash advance. That advance gets added to your credit card balance ASAP. And it’ll start accruing interest until it’s paid off.
Alternatives To Help You Make Your Mortgage Payments
Consider getting help from a relief or assistance program – or even your lender. Some of your options include:
Reaching out to a mortgage lender before you miss a payment
Your lender doesn’t want to see you struggle. If you’re having a hard time making your monthly mortgage payments, talk to your lender. They might be able to work with you and maybe even offer lower monthly payments temporarily.
Applying for mortgage forbearance
Try talking to your mortgage servicer about applying for mortgage forbearance (a temporary pause on monthly mortgage payments) until you can get back on your feet financially.
Getting guidance from a housing counselor
A housing counselor offers advice and options for people who are having a hard time paying their mortgage. If you’re interested in this option, use the Consumer Financial Protection Bureau’s housing counselor tool to find a counselor near you.
Making a mortgage payment with a credit card could cost you more than what you owe that month. It could cost you stress, time – and, ironically – more money.
If your current financial situation makes paying with a credit card a yes for you, do your research. Make sure you know what fees you’ll have to pay and what steps you’ll have to take to avoid inflicting long-term damage on your financial health.