CAN YOU PAY YOUR MORTGAGE WITH A CREDIT CARD: Tips on How to Pay

CAN YOU PAY YOUR MORTGAGE WITH A CREDIT CARD
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There are a few strong reasons to use a credit card to pay your mortgage. For one, there’s a chance you’ll get rewarded for your purchase. Paying your mortgage online using a credit card is also considerably easier and faster than mailing a cheque to your mortgage company. Some people who are having financial difficulties may contemplate if they can pay their mortgage with a credit card to earn points, especially people living in Australia. Let’s dive a little further to gain more clarifications on how to pay your mortgage with a credit card.

How to Pay Your Mortgage With a Credit Card

The majority of banks and lenders do not allow you to pay your mortgage with a credit card. They suggest that you pay by cheque or through an automatic bill payment system. “There are methods around [paying directly from a bank account], but they’re not ideal,” Michele Cagan, CPA and author of “Debt 101,” explains. “You can get cash advances, but they’re usually very costly. You might be able to buy money orders using your credit card and then deposit the money into your bank account to pay your rent or mortgage, although this can result in fees.”

Another option is to utilize a third-party payment provider, such as Plastiq. Which allows you to pay bills with credit cards even if your creditor does not accept them. Plastiq lets you pay a bill with your credit card plus a 2.85 percent fee, and then a check or ACH payment is sent to your lender. It’s a popular alternative, but you’ll have to decide whether the charge is worthwhile. A $1,000 mortgage payment would cost you an extra $28.50 per month if paid this way. It may be a good approach to get through a difficult month. But it is unlikely to be a financially sustainable strategy.

Pros and Cons of Paying Your Mortgage With a Credit Card

Some credit cards reward you with cashback or enticing sign-up incentives if you spend a particular amount of money on the card within the first few months.

According to Benét Wilson, senior credit cards editor for the points guy, those types of points can get you a trip. When using a rewards credit card to pay your mortgage just to earn points especially if you reside in Australia, Wilson advises weighing the costs versus the benefits.

If you can’t make your mortgage payment and need money right away. Transferring the balance to an existing credit card may be a better option than taking out a personal loan. However, if you are unable to pay the amount in full, you may be charged hefty interest. Potentially adding hundreds or thousands of dollars to your credit card account each month. Your credit report may suffer as a result of this.

“Putting your rent or mortgage on a credit card on a regular basis and not paying off the balance can result in considerably higher use, which will lower your credit score,” Cagan explains.

Credit utilization, or the amount of your available credit that you use, accounts for up to 30% of your FICO credit score. Let’s say your credit limit is $3,000 and you put $500 worth of goods on your credit card each month. This equates to a 16% usage rate. If you added a $1,000 mortgage payment to your $500 in spending, your utilization rate would rise to 50%. Experts recommend that you don’t use more than 30% of your credit limit because creditors view a low usage rate as a sign of confidence in your ability to manage credit responsibly.

Should You Pay Your Mortgage With a Credit Card?

Although it’s not suggested, there are two scenarios in which paying your mortgage using a credit card can make sense.

#1. Credit Card Points

You want to earn credit card points or satisfy a minimum spending requirement for an introductory bonus. But you don’t have enough money to pay off the bill in full.

If you pay your mortgage with a credit card to earn points in Australia, be sure you pay it off in full when the bill arrives. Carrying a huge load from month to month can cost you considerably more in interest than any benefits you might earn. Also, having a high credit utilization ratio might harm your credit score.

#2. You Can’t Afford to Pay Your Mortgage

This is obviously a terrible position, but while paying your mortgage using a credit card is one alternative, there are others.

“Pick up the phone,” Wilson advises if you find yourself in that circumstance. This year, both mortgage lenders and credit card companies have grown accustomed to negotiating forbearance terms. Wilson advises, “Work out something with them directly.”

Fees are frequently canceled, rates are reduced, and payment deadlines are postponed for consumers who establish special agreements with their creditors. The first step toward financial stability is to speak with your lender.

If you need advice on how to handle your debt, look into nonprofit credit counseling organizations. The national foundation for credit counseling can help you identify agencies like these.

Reasons to Pay Your Mortgage With a Credit Card

You can certainly pay your mortgage with a credit card, but is this a sensible decision? Let’s go over the primary reasons for taking this route, as well as some connected factors:

#1. Earning Credit Card Rewards

A mortgage payment is a large lump sum, and it’s tempting to try to charge it in order to get benefits. However, consider the transaction fees against any potential incentives before choosing this payment option.

Paying a $2,000 mortgage payment, for example, might reward you with $40 if you received 2% cashback on the transaction. However, if you utilize Plastiq and pay the 2.85 percent transaction fee ($57 in this scenario), you’ll finish up losing $17. The expense surpasses the gain, in this case, thus it’s not worth it.

You must also ensure that you will be able to pay your account in full at the end of the month. Any reward benefits will be swiftly wiped away if you pay additional credit card interest on your mortgage payment.

#2. Meeting a Sign-up Bonus Spend Requirement

In the appropriate conditions, paying your mortgage with a credit card could help you meet the minimum spend criteria for a lucrative sign-up bonus.

Let’s imagine you want to take advantage of the southwest rapid rewards priority credit card’s introductory bonus. Southwest is now running a program in which you can get 40,000 bonus points after spending $1,000 in the first three months. You’ll get the bonus if you pay your $2,000 mortgage via Plastiq, with points worth about $560 (based on TPG’s 1.4 cent point value) minus Plastiq’s 2.85 percent transaction fee ($57).

In Australia charging your mortgage payment to your credit card for a sign-up bonus works similarly to collecting a credit card to earn points if you can pay off your credit card account in full each month. Otherwise, exorbitant interest costs will quickly outweigh the value of your incentives, resulting in credit card debt.

#3. Avoiding a Late Payment or Delaying Foreclosure

If you’re experiencing a brief cash flow problem, you can consider charging your monthly mortgage payments on your credit card to avoid a late payment fee. Charging your payment may be the best option for a one-time incident. But only if you can pay off the entire credit card balance before the due date to avoid paying interest and sliding deeper into debt.

You’d still have to pay the transaction charge, but it might be worth it if it prevents a negative late payment record from appearing on your credit report. However, if you charge your mortgage to your credit card without a plan to pay it off, you may find yourself trapped in an ever-worsening debt cycle.

Alternatives to Using a Credit Card for Your Mortgage

If you’re having trouble paying your mortgage, you might be eligible for a variety of relief and help programs. You might want to try:

#1. Contact Your Mortgage Servicer Before You Miss a Payment

Share that you’re having trouble making your payments and if you think it’ll be a temporary or long-term problem. If you have a serious hardship, the mortgage servicer may be able to offer you a temporary repayment plan with a lower monthly payment or a mortgage modification.

#2. Look Into Mortgage Forbearance

Your mortgage servicer may also suggest that you put your loan into forbearance. This may allow you to temporarily lower or eliminate your mortgage payments.

#3. Get Help From a Housing Counselor

You can use the housing counselor tool from the Consumer Financial Protection Bureau or call the homeowners’ Hotline. A housing counselor may be able to advise you on several possibilities for staying in your house.

Mortgage lenders frequently do not want to foreclose on a home and will cooperate with a borrower to avoid doing so. Some of these programs or solutions may come at a cost. But they’ll almost certainly be less expensive than the fees. Moreso, interest you’ll pay if you start paying your mortgage with your credit card every month.

Factors to Consider When Paying a Mortgage With a Credit Card

Even if you can pay your mortgage using a credit card, it might not be worth it in terms of your budget, credit, or both. Before deciding on this option, there are a few things to think about:

#1. Fees vs. Rewards

If paying your mortgage with a credit card allows you to earn rewards on such a large amount, it’s enticing. However, a third-party processing fee can wipe out your gains. If you have a $2,500 mortgage payment and a 2.85 percent processing fee, you’ll pay $71.25 each time.

Credit card incentive rates differ by the issuer, but they rarely exceed the cost of a fee. The sign-up bonus on a credit card is an exception. It can make sense to place a one-time mortgage payment on your card to assist you to fulfill minimum spending criteria for an extravagant bonus that considerably outweighs the cost.

#2. The Cost of Interest

If you put your mortgage payment on a credit card and don’t pay it off in full each month. You might end up paying a lot of money in interest. Any profits you would earn would be readily wiped out by the long-term costs of carrying big continuous sums.

#3. Effect on Your Credit Scores

Making a mortgage payment on your credit card will certainly consume a considerable portion of your credit limit. Raising your credit usage ratio, or the ratio of your entire debt to your total credit limits. This figure has a big impact on your credit scores. You should aim for a low ratio of 30 percent or less. Mortgage payment of tens of thousands of dollars isn’t going to help.

FAQs

Can I earn rewards by paying my mortgage with a credit card in Australia

In Australia, you might be able to earn credit card points by paying your mortgage, but you’ll almost certainly pay more in fees than you receive in rewards.

can I pay my mortage with paypal?

Yes, but only if your mortgage company agrees. If you don’t have a credit card, you can transfer funds to a bank account and pay from there.

What happens if I use my credit card before the closing date?

Making a payment before your statement’s due date lowers the total sum reported to the credit agencies by the card issuer. As a result, the credit utilization percentage utilized to calculate your credit score that month decreases.

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