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Last Updated: March 25, 2024
Alternatives for Struggling Homeowners
Disclaimer: We are not qualified legal or tax professionals and are not giving advice. Always speak with a qualified professional before making any legal or financial decisions.
In the quest to maximize financial flexibility and rewards, many homeowners wonder if it's possible to pay their mortgage with a credit card.
While the concept presents enticing benefits, such as accruing rewards points or cashback, it's navigated by complex waters of financial terms, potential fees, and strategic considerations.
This guide provides a clear pathway for those contemplating this method, alongside essential cautions and alternative strategies for managing your mortgage payments more effectively.
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Why Would You Use a Credit Card to Pay Your Mortgage?
You might choose to use your credit card to pay your mortgage for several reasons. One is the rewards you accrue for using your card. Another is if you are temporarily short of cash. However, both situations can put you in a financial bind.
Can I Use a Credit Card to Pay My Mortgage?
It depends on your credit card network, credit card issuer, and mortgage lender. In general, Wells Fargo credit cards can be used as long as the mortgage holder accepts credit card payments. American Express does not allow mortgage payments on their credit cards. Visa allows you to use debit or prepaid credit cards to pay your mortgage.
Mastercard allows you to use either a debit or credit card to pay your mortgage. However, these are NOT cut in stone. Always check with both your credit card network and your credit card issuer. The mortgage lender is the next hurdle. The lender may be willing to accept credit card payments that are processed through a third-party payment service provider.
These third-person providers charge fees, often of 2.5% of the mortgage payment, every time you use the service. Those fees can offset any rewards that you might earn for using your credit card. The other issue is if you don’t pay off your card in full each month. The interest rates and credit card fees will eat up any reward you might get. See our sample below for more details.
| Monthly Mortgage Due: | $1000 | ||
|---|---|---|---|
| Typical Reward (2%): | + $20 | ||
| Third Party Processing Fee (2.5%): | – $25 | ||
| Average Monthly Interest Rate (1.16%): | – $11.16 |
Using a third-party payment processor, if you don’t pay off your card in full, the $20 in rewards will be eaten up the first month by the processing fee and monthly interest rate.
Before you pay a mortgage using your credit card, contact the card network, the card issuer, and the mortgage lender to make certain that the payment will go through. Otherwise, you’ll end up with late fees and other consequences for late or missing payments.
Should You Pay Your Mortgage with Credit Cards?
The answer, as you’ve probably realized, is no. Except for very specific and well-thought-out reasons, using a credit card to pay your mortgage is generally a bad idea. You stand the risk of running up some very high-interest charges.
Another issue is something called the credit utilization ratio. This is the ratio between debt and credit limit. The higher the ratio, the lower your credit limit and the lower your credit score. This can have a significant impact on your creditworthiness and ability to purchase a car or get a loan. Carrying a large credit card balance from a mortgage payment can hurt your credit score.
Whether paying your mortgage with a credit card makes financial sense depends on if you earn enough rewards to outweigh the fees and interest. For most, the added costs outweigh the rewards earned. For example, if you get less than 3% cashback on payments, this strategy is rarely worthwhile given added fees.
Paying your mortgage with a credit card can also negatively impact your credit score over the long run. If you have to carry a balance and pay interest due to income fluctuations, your credit utilization will spike and your credit score may plummet substantially.
This strategy only works if you can pay off the full credit card balance before interest applies every single month. We do not recommend paying your mortgage with a credit card if your monthly income varies significantly.
My Credit Card Mortgage Debt is Killing Me
If you have gotten yourself into financial difficulties using your credit card to pay your mortgage and you are drowning in debt, Pacific Debt, Inc. may be able to help you. We are a professional debt settlement company that works with people with significant amounts (over $10,000) in credit card debt to help settle their debt.
Alternatives if Struggling with Mortgage Payments
If you are struggling with mortgage payments and considering putting them on a credit card, there may be better options:
- Hardship Programs: Most lenders offer hardship or forbearance programs if you are going through financial difficulties. These can reduce or suspend payments temporarily. Talk to your lender about qualification requirements.
- Refinancing Your Mortgage: If your credit is still in decent shape, you may be able to refinance your mortgage at a lower interest rate or switch to a longer term to get lower monthly payments. Read our guide on refinancing with lower payments to learn more.
- Mortgage Payment Assistance: There are some government and non-profit programs available including loan modifications, which may help by reducing your monthly payment or interest rate.
FAQs
Conclusion
Paying your mortgage with a credit card can be done in some cases, but it rarely makes good financial sense. While you may earn some rewards, you need to weigh this against fees from services like Plastic that make the payments possible as well as potential impacts on your credit score.
For most people, the best course of action is to avoid putting essential expenses like housing payments on a credit card altogether. The risks include paying exorbitant interest rates if you carry a balance as well as damage to your credit standing. Paying by credit card should only be considered temporarily if necessary and your income allows you to pay off balances in full each month.
If making mortgage payments is a struggle, you have alternatives like lender hardship programs, mortgage refinancing, and assistance programs to explore first before taking on additional credit card debt. These programs are designed to help borrowers through financial hardships to keep their homes while managing payments.
Pacific Debt Inc.
Pacific Debt, Inc. is one of the leading debt settlement companies in the United States with a national debt relief program. We can help you settle your debt, often for far less than you owe. To be eligible for the Pacific Debt settlement program, you must have more than $10,000 in unsecured debt, and it takes roughly 2 to 4 years to complete our debt relief program.
Pacific Debt, Inc. is accredited with the American Fair Credit Counsel and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.
For more information, contact one of our debt specialists today. The initial consultation is completely free, and a debt expert will explain to you all your options so you can clearly understand them.
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- Should You Refinance Your Loan? (September 30, 2020)
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