Perhaps you’ve heard that you should never pay your mortgage payment with a credit card. We feel it’s important to point out that this advice is absolutely correct in almost every case. It almost never makes sense to pay your mortgage payment with a credit card. Not only are you merely transferring the debt from spot to another, but your credit card will charge much higher interest rates than your mortgage does. To make matters worse, some banks (or other mortgage lenders) tack on additional fees if you choose to pay by credit card. As we’ll discuss in a minute, these fees are almost never worth paying.
The One Exception
Let’s get right into it. The one exception to using a credit card to pay your mortgage is if you’re chasing a huge reward that is tied to spending. For example, some generous credit cards offer up to $1,200 in cashback (or equivalent points or travel miles). That’s a decent chunk of free money. However, you usually have to commit to making at least $3,000 in purchases in the first three months of opening the card in order to qualify for these kinds of bonuses.
Sure, you groceries and gas expenses might get you close. Even if you set all your streaming services to autopay on your new credit card, you might still struggle to meet that spending mark. Spoiler: the credit card companies don’t want to give you free money, so these goals aren’t always super easy to hit.
Use Your Mortgage
If you’re bonus chasing, why not consider using your mortgage? After all, it’s probably your largest monthly expense. As long as you pay off your credit card immediately, it will help you reach that spending goal in no time. Then your bonus will be unlocked and you come out in the black.
There are a few potential hurdles though. Before you start thinking how easy it’s going to be to score an extra $1,200, you need to consider the following things.
The basic truth is that most traditional mortgages do not accept credit card payments. Banks want your cash, not for you to just move debt around from account to account. If you called your mortgage lender and asked if you could pay via credit card, they would likely think you’re joking and hang up. Even if they didn’t, there’s probably nothing they could do to help you.
Luckily, there are third-party services that can make it happen. One of the more notable is Plastiq. They are a payment middleman. They will charge your credit card the amount for your mortgage payment, and then send the money to your lender via certified check or ACH transfer. The only downside is that they charge a percentage fee for every single transaction. And it’s not exactly cheap, at 2.85%.
Let’s stick with our previous examples. You opened a new credit card that offers $1,200 in cash back if you spend $3,000 in the first three months. Your mortgage payment is a nice, round $1,500 a month. So you only need to use two months worth of mortgage payments to unlock your bonus.
Using a service like Plastiq will cost you $85.50. (That’s 2.85% of the $3,000 total). Under any other circumstances, that would be a hard fee to swallow just to pay one of your bills. In this case, however, paying that $85.50 will easily unlock the $1,200 bonus. That’s still a net positive of $1,114.50 — a financial win, by any measure.
Some people like to use their credit card for everything they possibly can, since they are rewarded with cashback on every purchase. However, a cashback rate of 3% or higher is pretty rare — especially on standard purchases that aren’t gas or groceries or travel.
Sticking with our previously stated numbers, it wouldn’t make sense to use Plastiq to pay your mortgage in order to collect 2% cashback rewards. Their 2.85% fees would actually cost you more money than you’d earn. You should also be aware that Plastiq only accepts certain credit cards as payment. (Capital One is accepted, for example. Visa and American Express are not currently accepted). So if this plan sounds enticing to you, research it carefully beforehand.
The Bottom Line
Using high interest debt (which a credit card can easily turn into) to pay off your mortgage is typically an unwise decision. If, however, you need to make a couple larger-than-normal purchases to unlock a specific credit card bonus, it might actually work out in your favor. Just remember to cancel the automatic payments to your card once your bonus is unlocked.
Finally, remember that you need to pay off your credit card balance immediately. That $3,000 in mortgage payments would generate roughly $50 a month in interest fees (at 17.99%) if left alone. That would quickly eat into your $1,200 of bonus earnings. Don’t use this strategy unless you’re absolutely certain you can afford to do it correctly.