Being compliant in paying your mortgage is such an honorable achievement. However, at some point you may find yourself in a bind, and wonder to yourself whether or not you should make your mortgage payment with your credit card.
Although, it may be possible to pay your mortgage with your credit card — it will be difficult and definitely not advisable.
Because it will definitely cost you a lot.
Think about it — your mortgage and your credit card, sounds like a crazy balancing act. Think of the interest rates. Maybe you’re thinking that you can scrape up your credit card rewards on that huge mortgage. Or maybe you’re thinking you need some time to cover your mortgage since you’re short on cash.
The fact is, it’s not easy to find companies that accept this kind of debt-to-debt payment. And if you do have the option to pay your mortgage with your credit card, you need to thoroughly consider several factors like card issuer, the mortgage lender, and your credit card’s network.
Now, let’s dive into it.
As mentioned above, many credit companies will not accept credit cards to pay off debts including mortgages. They are very well aware that in so doing, it would let consumers trade one form of debt to a somewhat lower interest with a tax-deductible form — for another form of debt with somewhat high interest and is not tax-deductible. By doing so, regulators and politicians and the press will have a heyday censuring this kind of operation.
That is when the third-party payment processors will be useful. These agencies will empower you to use your credit card to procure from almost any organization. To date, the famous and perhaps the only third-party payment processor available out there is Plastiq.
There are some restrictions when you use your credit card to pay your mortgage — including Plastiq. The provisions restrict you from using Visa or American Express in paying your mortgage through Plastiq. However, MasterCard and Discover are allowed.
But here’s the catch.
There is no assurance that Plastiq is here to stay for a long period of time. Also, there is a possibility that MasterCard and Discover could stop allowing mortgage payments services. Simply put, this service is not a good choice to make payments for a mortgage.
And even if you can find a way to pay your mortgage with your credit card, even as part of a debt management plan, it’s probably not worth your credit or budget or maybe even both.
This is how it works, you pay Plastiq 2.5 to 2.85% transaction fee each time you use your credit card for a mortgage payment. In turn, Plastiq transfers the payment electronically, if and when the creditor accepts it, it cuts the mortgage lender a check, approving the transaction. You can also pay automatic payments by setting this up on your card. Or you can have the option of having a one-time payment. Then you pay your credit card for the mortgage payment plus the processing fee. If all is well, you will earn rewards just like in any other credit card purchase that you make.
Now it’s time to weigh things over. Which has more benefit, the rewards, or the fees?
Earning credit card rewards on that huge bill sounds like a good catch. But the cost of the third-party processing fee cancels out whatever earnings you will get. Think about it, the 2.5% processing fee that you need to cash in each time you pay. That’s huge too.
Another thing to carefully analyze is the amount of interest. If you put your mortgage payment on your credit card, it can result in skyrocketing charges on the interest if you don’t pay your credit card bill in full each month. Think about the long-term expense of carrying such large ongoing balances. That would effortlessly eradicate any rewards you might receive.
What about your credit card score?
If you make a mortgage payment with your credit card, it will take up a huge amount from your credit limit and increase your total debt. This will greatly impact your credit card score. If possible, you have to keep your credit card ratio low, like lower than 30%. Your mortgage payment will definitely not help your credit card score.
Back to the first question. Should you use your credit card in paying your mortgage? If you can circumvent those pesky issues discussed above, then it could be a choice. Just make sure that you’re not using a big portion of your credit card limit, you’re not hurting your credit card score ratio, and that your money is not tight.