If you have a rewards credit card, then charging your monthly mortgage payments to a credit card can be a big enough expense to help you quickly earn enough points and miles to travel for free.
Getting your lender to take your credit card, however, isn’t that easy. And despite the credit card points you’d earn, it could be a poor financial decision if you don’t pay the credit card bill in full and have to pay interest charges.
But there are ways to do it and earn the big points for such a large, regular purchase each month — if you’re willing to either pay some fees or take a few steps for a workaround.
When to use a credit card
A sign-up bonus may be the best time to use a credit card to make a mortgage payment.
While spending $1 can earn you one or two rewards points with most credit cards, enrolling as a new customer can earn you 35,000 to 50,000 bonus points at one time if you spend a certain amount of money within the first few months of having the card.
The credit card company may require you to spend $3,000 within the first three months to get the bonus points. Paying for a big-ticket item such as a mortgage can get you to that bonus a lot quicker than buying lunch every day can.
But most mortgage lenders won’t accept credit cards for a few reasons — they could lead to more defaults on mortgages by borrowers, and lenders don’t want to incur the 1-2 percent credit card fees for processing the payments, says Jonathan Duong, a certified financial planner and president of Wealth Engineers.
“In a world of very low interest rates, that’s just not a good way to add profits to their business,” Duong says.
For consumers who don’t pay their credit card off each month, paying a mortgage with a credit card and then having to pay 15 to 25 percent in interest on their credit card is a sure sign they can’t afford a mortgage, he says.
But if you’re going to pay off the credit card bill and not pay the extra interest that would negate any credit card rewards, there are ways to pay a mortgage with a credit card.
For a fee of around 3 percent, several online applications such as Venmo make online payments for customers. Plastiq points out on its website that its service can be used to pay taxes, buy a car or pay for anything else with a credit card, “even if they don’t accept cards” for a 2.5 percent fee.
The RadPad app had a promotion with Android Pay that allowed users to pay their rent with a credit card but without any fees. A check is sent through the app to the landlord, all while the customer earned points toward a vacation — such as to Iceland, as RadPad points out in a blog post. The post said the deal was available through the end of 2016, but the promotion was closed in early August.
The online service TIO accepts credit cards and then pay your bills for you, though its fee isn’t displayed on the site until the third step in a payment summary, and is calculated based on the company you choose to pay, amount being paid and payment method.
Paying 3 percent in fees will likely be equal to or more than the credit card rewards you’d get for paying a mortgage, and not worthwhile.
A cheaper option is to get a prepaid card that moves your money to an online checking account to get around the problem of a lender not accepting credit cards. The American Express Bluebird card and the Target Prepaid REDCard worked as a sort of debit card that had to be loaded with money, though Target’s card is no longer allowed to be used for mortgages.
Bluebird is also running into some problems, with many users having their accounts shut down for paying mortgages and other large bills that usually don’t accept credit cards.
But Bluebird still works, requiring an online checking account to pay bills with American Express’ free online payment system. The card can be loaded with things you can buy with your credit card, such as PIN-enabled Visa gift cards that work like debit cards, for a $5 fee at Walmart. Up to $1,000 a day can be added to the card.
Once the gift cards are loaded onto the Bluebird card, Bluebird can be used to pay your mortgage online. Another option is to have your paycheck or government benefits automatically added to your Bluebird account on payday for free through direct deposit.
Another way to use a PIN-enabled gift card that can be bought with a credit card to pay a mortgage is to use the gift card to buy a money order. These can be bought at banks, grocery stores and other large retailers.
You can take the money order to your bank and pay your mortgage in person, or mail it. They’ll likely have fees such as 70 cents at CVS to $5 at a bank, and have limits of $500 to $1,000.
Any of these steps may be worthwhile if you’re getting a sign-up bonus and the points and miles are worth more than the fees you’re paying. Even then, it can be a lot of work.
“If you have to jump through so many hoops, is it really worth it?” asks Duong, the financial planner.
If it’s enough to get you to Iceland or some other exotic location, then maybe it is.