How to Pay Your Mortgage with a Credit Card: A Comprehensive Guide

Paying your mortgage with a credit card might seem like a convenient option, but it comes with its own set of challenges and potential pitfalls. While mortgage loan servicers typically do not accept credit card payments directly, there are third-party services and workarounds that you might consider. However, the associated fees and high interest rates often make this an impractical choice. In this blog, we will explore the various methods to pay your mortgage with a credit card, discuss whether it is a good idea, and suggest alternatives that might be more beneficial.

Methods to Pay Your Mortgage with a Credit Card

There are four primary ways you can attempt to use your credit card to pay your mortgage:

Use a Third-Party Service

Some services act as intermediaries by accepting your credit card payment and then sending a check or ACH transfer on your behalf. While these services are more commonly used for paying rent, some companies, such as Plastiq, accept certain cards for mortgage payments. Plastiq charges a 2.85% transaction fee for each payment and only accepts payments via Mastercard or Discover credit cards from select card issuers.

Buy a Money Order

You might also be able to buy a money order with your credit card and deposit it at your bank or send it to your mortgage servicer. However, money orders often have a $1,000 limit, and there may be a fee for each one you buy. Many merchants do not accept credit cards for money orders, and some card issuers might treat the transaction as a cash advance, which can be costly.

Transfer a Balance to Your Bank Account

Some credit cards allow you to use a balance transfer to move money into your bank account. You could then make the payment from your account as you normally would. The card issuer typically charges a balance transfer fee (3% or 5% is common), and the balance can accrue interest based on your card’s balance transfer annual percentage rate (APR).

Get a Cash Advance

Another option could be to take out a cash advance with your credit card. You could then use the cash to buy a money order or cashier’s check, or deposit it and pay by check or electronic transfer. There may be a cash advance fee, and the advance often starts accruing interest right away. Furthermore, your cash advance limit may be lower than your credit limit.

Although these options present potential ways to use your credit card, it does not necessarily mean doing so is a good idea.

Should You Pay Your Mortgage with a Credit Card?

There are two main reasons people consider using a credit card to pay their mortgage: either they want to earn credit card rewards, or they cannot afford the mortgage payment. However, before you use a credit card, consider the following:

Fees

Third-party services and retailers that sell money orders may charge you fees. Additionally, your credit card may have fees for balance transfers and cash advances, which sometimes apply to cash-like purchases like money orders. These fees may seem insignificant at first but can easily snowball if you wind up paying them every month.

Interest

Your purchases and balance transfers may accrue interest if you cannot pay off your balance in full each month. Cash advances may have a separate, higher interest rate that starts to accrue right away.

The Card’s Rewards

If you were planning on using your mortgage payments as an easy way to earn credit card rewards, you are likely out of luck. In many cases, the fees you pay will drastically outweigh what you can earn in rewards—if you earn rewards at all.

Promotional Interest Rate Offers

You may be able to temporarily avoid accruing interest on purchases or balance transfers if your card has a promotional 0% APR offer. Be sure to read the terms closely and make sure you can pay off the balance by the end of the promotional period.

The Effect on Your Credit Score

A high balance on your credit card could lead to a high credit utilization ratio that hurts your credit scores. You may be able to avoid this by paying off the balance before the end of your statement period. If you are going to carry the balance, its impact on your credit score could limit your borrowing options later.

The high fees and other downsides of making mortgage payments with a credit card mean it is a bad idea for most people. If you are trying to avoid missing a mortgage payment, using a credit card as a strategic stop-gap might be an option, but you will want to exhaust your other options first. Otherwise, you could wind up with a lot of high-interest debt.

Alternatives to Using a Credit Card for Your Mortgage

If you are struggling to afford your mortgage payment, you may be eligible for various relief and assistance programs. You could try to:

Contact Your Mortgage Servicer

Before you miss a payment, share that you are struggling to afford your payments and whether you expect it to be a short- or long-term issue. The mortgage servicer might be able to offer a temporary repayment plan with a lower monthly payment or a mortgage modification if you experienced a significant hardship.

Look into Mortgage Forbearance

The mortgage servicer may also discuss putting your mortgage into forbearance. Doing so could let you temporarily reduce or stop making your mortgage payments.

Get Help from a Housing Counselor

You can use the Consumer Financial Protection Bureau’s housing counselor tool or call the Homeowners HOPE Hotline. A housing counselor may be able to suggest different options you can use to stay in your home.

Mortgage lenders often do not want to foreclose on a home and are willing to work with a borrower to avoid this outcome. There may be a cost to some of these programs or options, but they are likely much cheaper than the fees and interest you will accrue if you start using your credit card to pay your mortgage every month.

Monitor Your Credit Report and Score

It is also a good idea to continually monitor your credit while you are repaying your mortgage. If you have a good payment history and high credit score, you may be able to refinance your mortgage to lower your interest rate, decrease your monthly payment, or get cash out. You can check your Experian credit report for free and sign up for free FICO® Score monitoring.

At O1ne Mortgage, we understand the complexities of managing mortgage payments and are here to help you navigate your options. If you have any questions or need assistance with your mortgage, do not hesitate to call us at 213-732-3074. Our team of experts is ready to provide you with the best mortgage services tailored to your needs.