Can I pay my mortgage with a credit card?
While you may be able to, you might not want to
Considering the ubiquity of credit cards in today’s world, it seems a given that you should have the option to pay your mortgage with one.
But paying your mortgage with a credit card is a bit more complicated than using it at the grocery store. In fact, you might want to think twice before reaching for the plastic to cover your monthly mortgage — if it’s even an option with your lender in the first place.
Key insights
- Most mortgage lenders do not offer a credit card payment option for making a monthly payment.
- A borrower will likely need to use a third-party service to make a mortgage payment with a credit card.
- There are significant trade-offs worth considering, including the impact on your credit score, before using a credit card to pay your mortgage.
Using a credit card to pay your mortgage
Technically, you do have the option of using a credit card to pay your mortgage, but it will likely involve a workaround.
For starters, most mortgage lenders or servicers do not allow credit card payments. For most borrowers, the only option for using a credit card to make a mortgage payment is to use a third-party service.
If you do choose to use a credit card to pay your mortgage, it’s essential to weigh the costs and benefits. While you may earn cash back or rewards points, their value may not offset the payment’s processing fee. On the other hand, while you may pay interest from carrying a balance on your credit card, the charges may be justified if using a credit card helps you avoid foreclosure.
How to pay your mortgage with a credit card
If your lender doesn’t allow credit card payments, it’s possible to use a third-party payment company, such as Plastiq. With this service, you make a credit card payment to Plastiq, and Plastiq makes a payment on your behalf to your lender via one of your lender’s permitted payment methods.
The catch is that Plastiq charges a 2.9% fee (as of publication) for each credit card payment it facilitates. If your mortgage payment is $2,700 per month, it would cost you $78.30 to pay it by credit card with Plastiq.
It appears Plastiq may be the only company currently offering this service, and even Plastiq has its limitations. At this time, you can only use Mastercard and Discover credit cards for mortgage payments through Plastiq.
Should you pay your mortgage with a credit card?
There are short-term advantages to paying your mortgage with a credit card. But for every immediate advantage a credit card payment offers, there are long-term impacts worth noting, too. Ask yourself these questions before you pay your mortgage with a credit card.
Are the rewards worth the fees?
“A 2.9% processing fee is very high comparatively since most credit cards will give you 1% to 2% cash back on average. Therefore, using a credit card should only be a last resort. ”
Is avoiding a late payment worth the interest charges?
If you’ll be unable to pay off your credit card balance soon after making the mortgage payment, check if the card’s interest charges will be higher or lower than the late payment fee your mortgage lender charges.
Is it worth potentially damaging your credit score?
Your mortgage payment is likely a large amount, so routinely using your credit card to make your mortgage payment means you’re significantly increasing your credit utilization. This will have a negative impact on your credit score. That said, missing a mortgage payment will have an even more severe impact on your credit score.
» MORE: What affects your credit score?
Pros and cons of paying with a credit card
Before paying your mortgage with a credit card, carefully consider the advantages and disadvantages.
Pros
- Paying with a credit card allows you to hold on to your cash longer.
- Large mortgage payments can earn a lot of cash back or rewards points.
- Credit cards allow you to pay on a schedule that fits your budget.
- An emergency credit card payment can help you avoid your lender’s late payment fee or possible foreclosure.
Cons
- You’ll probably need to use a third-party company to facilitate the transaction.
- Making a mortgage payment with a credit card will likely incur substantial processing fees.
- The payment will increase your credit utilization and may hurt your credit score.
- High credit card interest rates can strain your budget over the long term.
Alternatives to paying with a credit card
If you’re struggling with mortgage payments due to financial hardship or temporary cash flow problems, there are other options available that might work better for your financial situation than making a mortgage payment with a credit card.
Bring in extra income
Look for ways to bring in additional income if possible, which can give your budget the added boost it needs.
Woroch offers tips such as taking on a side hustle, renting out unused items (such as an extra bedroom or your vehicle) or using cash-back apps. You can also try to negotiate your monthly bills to free up extra cash. Lastly, consolidating credit card debt is another option for freeing up cash.
“Carrying debt across multiple accounts can dry out your budget quickly thanks to high interest fees,” said Woroch. “With interest rates on the rise, get a handle on any variable-rate debt by consolidating with a low-interest personal loan.”
Talk to your mortgage servicer
If it seems likely you will miss your mortgage payment, the most proactive solution is to contact your mortgage servicer as soon as possible. The servicer may offer alternatives for payment in the short term, or it may have long-term options such as a loan modification.
Apply for mortgage forbearance
Mortgage forbearance is costly and involves a bit of paperwork. But it can keep you in your house while you focus on improving your financial situation.
“Through a mortgage forbearance, you can pause or reduce payments for a set period of time. This may buy you time to get through a difficult financial period so you can get back to paying your mortgage payments in full and on time,” said Woroch.
“Keep in mind: Your account will continue to accrue interest each month, which is then compounded to your total mortgage balance. This means it's added to what you owe, and in the long run, you will pay interest on that interest,” she noted.
Consider housing counseling
No matter what stage of homeownership you’re in — from purchasing a home to budgeting for monthly mortgage payments — housing counseling offers benefits such as explaining your options for your particular financial situation and mortgage.
The Consumer Financial Protection Bureau allows you to search for housing counselors approved by the U.S. Department of Housing and Urban Development.
FAQ
Can I set up automatic mortgage payments with my credit card?
Most mortgage lenders do not accept credit card payments directly. However, if you use a third-party payment processing service, such as Plastiq, you can set up automatic payments using your eligible credit card.
Will paying my mortgage with a credit card affect my credit score?
Paying your mortgage with a credit card will likely affect your credit score in some way. It will increase your credit utilization, i.e., the percentage of revolving credit you use out of all the revolving credit extended to you by your creditors. High credit utilization hurts your credit score. That said, consistently making your debt payments, including your mortgage payment, has a positive effect on your credit score.
What bills can be paid with a credit card?
Bills for your phone, internet, cable, streaming services, insurance and some utilities can typically be paid with a credit card. Many loan payments, however, cannot be made directly with a credit card. If you need to pay a bill to a lender that doesn’t accept credit card payments, you can check out a third-party company such as Plastiq. But expect additional fees.
Bottom line
If you’re curious if you can pay a mortgage with a credit card, the answer is yes — in a roundabout way that requires some effort and likely results in substantial fees.
While paying your mortgage with a credit card can mean earning rewards, it also means increasing your credit utilization and possibly impacting your credit score. Before clicking the “complete payment” button, weigh all your options and consider the additional costs.
Article sources
- Plastiq, “ Pricing .” Accessed June 20, 2023.
- Federal Reserve Bank of St. Louis, “ Commercial Bank Interest Rate on Credit Card Plans, All Accounts .” Accessed June 21, 2023.
- Consumer Financial Protection Bureau, “ Find a housing counselor .” Accessed June 20, 2023.
