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Paying Your Mortgage with a Credit Card: What You Need to Know

How to Pay Your Mortgage with a Credit Card

If you’re considering paying your mortgage with a credit card, be prepared for some challenges. Mortgage servicers typically don’t accept credit card payments directly. However, there are third-party services and other methods you might use. Keep in mind, though, that fees and high interest rates can make this option less appealing.

Use a Third-Party Service

Some services act as intermediaries, accepting your credit card payment and then sending a check or ACH transfer to your mortgage servicer. For example, Plastiq charges a 2.85% transaction fee and accepts payments via Mastercard or Discover from select issuers.

Buy a Money Order

You might be able to purchase a money order with your credit card and then deposit it at your bank or send it to your mortgage servicer. However, money orders often have a $1,000 limit and may incur fees. Additionally, many merchants don’t accept credit cards for money orders, and some card issuers treat these transactions as cash advances.

Transfer a Balance to Your Bank Account

Some credit cards allow you to transfer a balance to your bank account, enabling you to make the mortgage payment from your account. This method typically involves a balance transfer fee (commonly 3% or 5%) and interest accrual based on your card’s balance transfer APR.

Get a Cash Advance

Another option is to take out a cash advance with your credit card, then use the cash to buy a money order or cashier’s check, or deposit it and pay by check or electronic transfer. Cash advances often come with fees and start accruing interest immediately. Additionally, your cash advance limit may be lower than your credit limit.

Should You Pay Your Mortgage with a Credit Card?

People generally consider using a credit card for mortgage payments to earn rewards or because they can’t afford the payment. However, there are several factors to consider:

Fees

Third-party services and retailers selling money orders may charge fees. Your credit card may also have fees for balance transfers and cash advances, which can add up quickly if you’re paying them monthly.

Interest

If you can’t pay off your balance in full each month, your purchases and balance transfers may accrue interest. Cash advances often have higher interest rates that start accruing immediately.

Rewards

Using your mortgage payments to earn credit card rewards may not be worthwhile, as fees often outweigh the rewards earned.

Promotional Interest Rate Offers

Some cards offer promotional 0% APR on purchases or balance transfers. Be sure to read the terms closely and ensure you can pay off the balance before the promotional period ends.

Credit Score Impact

A high balance on your credit card can lead to a high credit utilization ratio, negatively affecting your credit score. Paying off the balance before the end of your statement period can help mitigate this impact.

Alternatives to Using a Credit Card for Your Mortgage

If you’re struggling to afford your mortgage payment, consider these alternatives:

Contact Your Mortgage Servicer

Reach out to your mortgage servicer before missing a payment. They may offer a temporary repayment plan with a lower monthly payment or a mortgage modification if you’ve experienced a significant hardship.

Mortgage Forbearance

Your mortgage servicer may discuss putting your mortgage into forbearance, allowing you to temporarily reduce or stop making payments.

Get Help from a Housing Counselor

Use the Consumer Financial Protection Bureau’s housing counselor tool or call the Homeowners HOPE Hotline for assistance. A housing counselor can suggest options to help you stay in your home.

Monitor Your Credit Report and Score

Continually monitoring your credit while repaying your mortgage is a good idea. A good payment history and high credit score may allow you to refinance your mortgage, lowering your interest rate, decreasing your monthly payment, or getting cash out. You can check your Experian credit report for free and sign up for free FICO® Score monitoring.

For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. We’re here to help you navigate your mortgage options and find the best solution for your financial situation.

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