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 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.
There are some nifty tricks that you can be doing to pay your mortgage and paying by credit card, money order or online can reap its own rewards. Whether it's mileage or credits or a loyalty program, if done right, it could result in a win-win situation.
Settling Down Payment On House With Your Credit Card
Typically, home sellers and lenders do not accept credit card payments. Your credit card limit is unlikely to be high enough to accommodate such an expense even if they accept credit cards. Also, lenders usually require that the funds for your down payment have spent at least 60 days (2 months) in your bank account to get 'seasoned'.
Getting around this is pretty possible, however. With third-party apps like Venmo, you can transfer your balance from your credit card to another account for a fee and then transfer the money to your account. You can also get a cash advance on your credit card.
The problem with this is that interest on credit card loans is usually much higher than what you would get for a home loan. Apart from that, usually, lenders want to know where the money for the down payment came from. They are not likely to accept a credit card loan as a down payment because the point of a down payment is for them to see that you are a worthy risk.
If they accept a credit card loan, you might pay more interest on your mortgage due to the lower credit score resulting from your high credit to debt ratio. The limit is usually less than the purchase limit with a cash advance, so you will not get much spending power from this.
Paying Your Mortgage With PayPal
PayPal is an online payment platform that allows you to send and request money online with ease. You create a free account linked to either your credit card, debit card, or bank account to use PayPal. You can directly make mortgage payments with PayPal if your lender accepts them.
If they do not accept PayPal, you can use it to get a cash advance on your credit card. You can then use this to pay for your mortgage. To do this, you can transfer money to another user and have them move the money to their bank account and make the payment for you. They could also transfer the money to your bank, and you can make the payment yourself.
Since you are drawing money from your credit card, the high interest that applies to credit card loans applies here. You should think about it very carefully before you do this, to ensure that the benefits outweigh the risk. Usually, lenders give a 15-day grace period to pay your mortgage, after which a heavy late fee is imposed.
If you need more time to make the payment but do not want to pay the late fee and damage your credit score, you can choose to pay this way. As long as you pay back with the acceptable limit, you avoid paying the heavy credit card interest. If you can't pay back within that time frame, you could end up paying a lot more interest.
Frequently Asked Questions
Most lenders do not accept direct credit card payments. But if your mortgage lender accepts it, then you can.
Not directly, but with third-party apps like Venmo, you can do it. You can also get a cash advance on your credit card.
You can use a third-party app like Plastiq or Venmo. But you would have to pay a percentage of the cost in fees.
Yes, but only if your mortgage lender accepts it. If not, you can transfer money to a bank account and pay from there.
Because of the terms and conditions, you cannot use American Express or Visa card to pay your mortgage, even with Plastiq.