That massive monthly mortgage payment – wouldn’t it be great to charge it to a rewards credit card and rake in some sweet cash back on all that spending? It sounds tempting, but is paying a mortgage with a credit card actually possible?
The short answer is: sometimes, but it’s tricky. Most mortgage lenders don’t allow direct credit card payments. Even if you find a workaround, extra fees often wipe out any rewards earned. However, paying a mortgage with your credit card can make sense in certain limited situations.
In this comprehensive guide, we’ll cover:
- The pros and cons of paying your mortgage with a credit card
- How services like Plastiq facilitate credit card mortgage payments
- When it actually pays off financially
- Alternatives if you’re struggling with payments
- Steps to take if you want to try paying your mortgage this way
So can you really pay your mortgage with a credit card? Let’s dig in…
Why Would You Want to Charge Your Mortgage to a Credit Card?
There are a few potential incentives for putting your mortgage payment on a credit card:
To Earn Rewards and Cash Back
With average credit card rewards often topping 2% cash back on general purchases, charging a 4-figure monthly mortgage payment could generate some serious rewards. Who wouldn’t want the possibility of bringing in over $50/month in cash back or points without any extra spending?
To Meet Minimum Spending for Bonuses
If you recently opened a new rewards credit card with a lucrative welcome bonus, you’ll need to spend a certain amount in the first 3 months to earn it. Putting a single mortgage payment on the card could get you most of the way there quickly.
To Delay the Payment if Short on Cash
Since credit cards essentially let you borrow against a line of credit, paying your mortgage with a credit card when money is tight could enable you to avoid a late mortgage payment while giving you until the credit card’s due date to pay.
The Challenges of Paying a Mortgage With a Credit Card
It all seems easy enough – so why don’t more people charge their home loans to plastic?
The simple reason is that most mortgage lenders don’t actually allow direct credit card payments. After all, whenever a credit card is used, the merchant (in this case the mortgage company) gets charged a processing fee by the card network. Most lenders aren’t willing to eat that cost.
On top of that, some credit card companies explicitly prohibit mortgage payments with their cards in their terms and conditions. So paying your mortgage with a credit card requires jumping through some extra hoops.
Using a Service Like Plastiq to Pay Your Mortgage
To get around the restrictions from mortgage lenders and issuers, you need to use an intermediary third-party service. The most well-known option is Plastiq.
Plastiq acts as a middleman to facilitate payments of all kinds of expenses that don’t normally accept credit cards – like a mortgage, rent, taxes, tuition, and more. You connect the service to your credit card, mortgage details, and bank account.
Then, when you submit a mortgage payment through Plastiq, here’s what happens:
- Plastiq charges your credit card the amount of your mortgage payment plus a 2.9% processing fee
- Plastiq sends your lender either a paper check, ACH transfer, or wire transfer for the mortgage payment amount
- You pay your credit card bill as normal by the due date
This enables you to indirectly pay your mortgage with a Discover or Mastercard credit card. You can even set up automatic recurring payments through Plastiq if desired. The key catch is that 2.9% fee on every payment, which can really eat into any rewards earned.
Should You Pay Your Mortgage With a Credit Card?
With the logistics figured out, should you actually charge your home loan payments to a credit card? Here are the key considerations:
When It Does Pay Off Financially
Assuming you immediately pay off the credit card charge to avoid interest, putting mortgage payments on a rewards card can make sense in limited situations:
- You have a card that offers cash back rewards of 3% or higher that exceeds Plastiq’s 2.9% fee.
- You want to earn a lucrative credit card welcome bonus requiring a large spending minimum within a short timeframe.
- You occasionally need to briefly delay a mortgage payment due date but will have the funds prior to your credit card bill due date.
As long as you have a plan to pay off the card balance each month and the rewards outweigh the fees, it can be an efficient short-term strategy.
The Downsides to Be Aware Of
However, there are also some significant drawbacks and risks to be conscious of with putting mortgage bills on a credit card:
- The processing fees can often erase the value of any rewards earned.
- If you carry a balance, high credit card interest rates apply which incur major extra costs.
- It can negatively impact your credit score due to increased credit utilization.
- It’s an extremely expensive way to address long-term financial issues if you can’t pay off the card.
Alternatives if Struggling Financially with Mortgage Payments
Speaking of financial difficulty, if falling behind on your home loan payments is your key motivator to want to charge them to plastic, STOP! Paying a mortgage with a credit card should not be used as a Band-Aid solution for unaffordable housing costs or long-term financial struggles.
Doing so will only worsen your situation down the road when those 23% credit card APRs kick in. Plus, it can tank your credit score making future borrowing even harder.
Instead, here are some proactive steps to take if making ends meet each month has become difficult:
- Contact your mortgage lender to honestly discuss your situation and request options like forbearance, repayment plans, loan modification or refinancing.
- Consider downsizing to a smaller living situation with more affordable monthly housing costs if possible.
- Look into whether you qualify for mortgage protection insurance payments to cover costs temporarily if you lost your job or income source.
- Talk to reputable nonprofit credit counseling agencies like NFCC to get expert financial guidance and debt help.
The earlier you seek assistance from professionals, the more tools and alternatives you’ll have to avoid drastically worsening your financial position. Paying a mortgage with a credit card tends to exacerbate rather than solve affordability problems.
What If Your Mortgage Lender Prohibits Credit Card Payments?
Given the restrictions imposed by most lenders, you may discover your requests to pay mortgage bills with a card keep getting rejected. Before you give up entirely though, a couple last ditch options can be attempted:
- Find out whether your mortgage company might accept debit card or money order payments instead. If so, you may be able to use your credit card to obtain a pin-enabled prepaid debit card or money order to make the payment.
- Explore payment apps like PayPal that generate electronic transfers. In some cases, these peer-to-peer apps enable credit card funding for transfers to entities that normally don’t support card payments directly.
- Get creative maximizing Plastiq’s referral program when possible to reduce your own transaction fees. Referring active users can earn you fee-free dollar credits.
Who Might Want to Pay Their Mortgage With a Credit Card?
Given the mixed potential value of putting your home loan payments on plastic, who is the best candidate for this strategy?
The reality is doing this only makes sense for a small niche of cardholders. Ideally you:
- Have excellent credit and qualify for top rewards credit cards
- Trust yourself not to overspend or carry credit card balances
- Are extremely financially responsible and detail-oriented
- Understand the risks and have a solid repayment plan
- Merely want to utilize this strategy short-term, not indefinitely
Being deliberate and selective in whether paying your mortgage with your credit card could pay off is key. Don’t rush into charging a massive monthly bill without preparing for the plan to succeed.
Steps for Paying Your Mortgage With a Credit Card Successfully
If upon review you decide you may benefit from putting your home loan payments on a credit card, here are some vital steps for giving yourself the highest chance of winning with this strategy:
- Thoroughly review your mortgage documents and credit card terms for any restrictions on these types of payments. Confirm there are no prohibitions from either party.
- Research Plastiq’s rates and policies, and determine the maximum fees you’d incur for processing mortgage payments with your card details.
- Calculate whether the rewards you expect to earn with your credit card exceed the processing costs. If benefits outweigh expenses, move forward.
- Take time building your credit card and banking cushion prior to initiating mortgage charges – have at least 3-6 months of minimum payments available as an emergency fund. Don’t risk going into further debt without reserves.
- Automate credit card and bank account payments for the full statement balances each month. Removing the chance of human error or missed due dates is essential.
- Start conservatively by putting only one month’s mortgage payment on your card initially to monitor the process goes smoothly before increasing frequency.
Following this cautious game plan will let you test out if you can truly come out ahead paying your mortgage with a credit card while avoiding financial risk. Adjust your approach over time based on real-world results.
Key Takeaways – Is Paying a Mortgage With a Credit Card Worth It?
So what’s the verdict – should you pay your home loan with your plastic? Ask yourself these key questions:
- Do you expect to earn more in rewards than you’ll pay in processing fees?
- Are you extremely confident you can operate this strategy responsibly without taking on credit card debt?
- Is your credit score high enough to easily absorb some utilization impact short term?
If you answered yes to ALL of the above, going through the effort to facilitate credit card mortgage payments could provide small but meaningful financial advantages. Just be cautious, narrowly targeted, and diligent avoiding debt or credit damage.
For the vast majority of households though, the convenience and rewards are NOT worth the risks and expenses. Paying a mortgage with a credit card only suits a very particular financial profile – assess carefully whether that description truly fits you!
Hopefully this guide gave you clarity on the possibility, procedures, upsides and dangers of charging your home loans to a credit card. Pay close attention to minimizing fees and interest expenses to give yourself the best shot at coming out ahead. But unless you stand to earn a massive one-time bonus, explore all alternatives before resorting to plastic for those big monthly housing bills!
