Credit Card Mortgage
Can you pay your with a credit card?
Credit cards have become a popular way not just to finance expensive purchases, but also to reap rewards. By putting more purchases on plastic, you can earn points toward frequent flyer miles, cash back, and other benefits.
If you do a good job of paying your credit card bill on time, you may be wondering if you should be putting your monthly payments on a credit card. After all, this could ramp up the spending you do on the card and give you a corresponding boost in rewards points. You could even put some of these rewards toward your home, such as using cash back to put more money toward the mortgage or home renovations.
However, charging your mortgage payment to a credit card is usually not an easy process. It can also be an unwise habit to form, since it could make it more difficult to manage your debt.
The main roadblock to using a credit card for your mortgage payments is that lenders don't tend to offer this option. Stephanie Booth, writing for the National Association of Realtors, says merchants have a certain incentive to accept credit cards because they might encourage a buyer to spend more money at their business. Lenders don't have this incentive, because borrowers will only be using the credit card to make a mortgage payment, not purchase any other product or service.
A lender might also be wary of credit card payments out of fear that a buyer will be more likely to default. After all, charging a mortgage payment to a credit card is using one debt to finance another. Constance Brinkley-Badgett, writing for Credit.com, says mortgage payments can increase your credit card bill considerably; if a borrower is unable to keep up with these bills, they can see their debt skyrocket under the credit card company's more onerous interest rates.
This kind of bad debt cycle can be particularly dangerous to your financial health. You might become more lax about your spending habits, or try to use a credit card to manage a mortgage you can't really afford. Dana Berberich, writing for the financial site Bankrate, says that even if you are good about managing your credit card bills, you might have to carry a balance during emergencies or other unexpected events. This can ramp up the price you pay in credit card fees, negating any benefit you might receive from rewards.
Of course, if you have been vigilant about paying off your credit card bill each month, you may still be interested in charging your mortgage payments. As long as you can keep your credit card spending within its normal range, you should still be able to pay off the larger bills.
For this type of homeowner, there are third party services available to get around the restrictions placed by lenders on credit card payments. Melissa Lambarena, writing for the financial site NerdWallet, says one example is Plastiq, a service that allows you to pay for rent, tuition, mortgage payments, and other regular payments via credit card. If the lender doesn't accept electronic payments, the service delivers a mortgage check instead.
The downside to such an arrangement is that the third party service will typically charge a convenience fee. The monthly cost of these fees could easily make the service more costly than beneficial. You'll need to carefully calculate the cost of the service and determine whether the rewards will outweigh the expense.
While on-time mortgage payments are good for improving your credit score, charging them to a credit card might actually be detrimental. The mortgage payments will put your credit card balance closer to the maximum limit each month, making you seem like a riskier consumer.
In some cases, however, using a credit card for mortgage payments can be more beneficial. Amy Fontinelle, writing for the financial site Investopedia, says some lenders even offer their own credit cards and apply cash back benefits directly to the principal of the mortgage. This option can be a savvy way to pay down your mortgage faster, as long as you are responsible in managing your credit card debt.
Charging a mortgage payment can also be a good way to meet the introductory conditions of a credit card, which are