Should You Pay Your Mortgage With a Credit Card?

Read Time: 6 minutes

You may be able to use a credit card to make a mortgage payment. But before you do, understand there can be a lot of added expenses and hurdles, and with a few exceptions, mortgage lenders don’t allow you to pay your mortgage with a credit card. Credit card companies may also have restrictions on paying mortgages using their card.

However, while it’s generally not advisable, when you’re short on options, there are still ways you can tap into a credit card for housing purposes. 

Here are some workarounds and strategies to consider.

Using a Rewards Card

If you have a rewards credit card, charging your mortgage payments can be a big enough expense to help you quickly earn enough points and miles to meet bonus thresholds and travel for free. In fact, a sign-up bonus may be the best time to use a credit card to make a mortgage payment.

However, getting a lender to take your credit card as a payment isn’t easy. Most lenders won’t accept credit cards because that could lead to more mortgage defaults by borrowers, and lenders don’t want to incur the 1-2 percent credit card fees for processing the payments.

Consumers who use a credit card this way and don’t pay their credit card off each month could get slammed with paying 15-25% interest on their card when the bill comes due.

The other issue is that your card network, issuer, and mortgage lender all must separately approve payment with a card, which is even more daunting since each has its own rules.

For example, Visa allows mortgage lenders to accept Visa debit and prepaid card payments, while Mastercard allows the use of debit and credit cards for mortgage payments. Some card issuers, like Bank of America, don’t let their credit cards be used for mortgage payments.

However, Wells Fargo credit card holders can use their cards to pay a mortgage if the mortgage lender accepts them.

If you’re considering this option, check far in advance to make sure all processors allow this type of transaction so you don’t run the risk of a late or declined mortgage payment. Also, pay your credit card bill in full as soon as possible.

Otherwise, you’ll pay credit card interest on top of mortgage loan interest, which is a hefty price to pay.

Using a Third-Party Service

A third-party payment service like Plastiq facilitates mortgage payments with a Discover or Mastercard credit card. Visa and American Express don’t currently allow mortgage payments through this service.

You pay Plastiq a 2.9% processing fee of your mortgage payment when you use your credit card. Plastiq then delivers an electronic payment if the lender accepts it or cuts the mortgage lender a check, eliminating the need for the mortgage lender, the credit card issuer, and the credit card payment network to approve the transaction.

Venmo or PayPal may be another option and charge fees of about 3%. If lenders do not accept these platforms, get a cash advance on your credit card and transfer it into your Venmo or PayPal account.

You can then use this to pay for your mortgage. It’s also possible to take a cash advance on your credit card, deposit it directly into your bank account, and pay your mortgage that way.

However, cash advances on your credit card usually come with a 3-5% cash advance fee, so weigh this as part of your decision before moving forward.

Third-party services may allow you to make a one-time payment or set up automatically recurring payments for maximum flexibility. And, if you made the transaction with an eligible rewards credit card, you’ll earn rewards as you would with any other purchase.

Using Prepaid Cards

Paying 3% in fees is a lot less than the credit card rewards you’d get for paying a mortgage, meaning it is probably not worthwhile.

A cheaper option is to get a prepaid card that moves your money to an online checking account to solve the problem of a lender not accepting credit cards. For example, the American Express Bluebird card acts as a debit card that can be loaded with money, but you’ll need 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. Once the gift cards are loaded onto the Bluebird card, Bluebird can be used to pay your mortgage online. 

Another option is to automatically add your paycheck or government benefits to your Bluebird account on payday for free through direct deposit.

You can also buy pin-enabled Visa gift cards with your rewards credit card and then use those gift cards to pay for money orders. Most people can buy pin-enabled gift cards at a grocery store, which can make sense if you have a grocery store credit card offering bonus points in this category.

From there, you can set up your PIN and use your gift card to purchase money orders from banks, grocery stores, Walmart, or anywhere else money orders are sold.

Your ability to pull this strategy off may be location-specific. For example, your local grocery store may have a strict policy regarding the types of cards you can use to buy money orders.

Also, remember that some banks specifically say that gift cards are considered a “cash equivalent” and do not earn rewards. While this may not be true if you buy the occasional gift card, that could change as soon as you start buying thousands of dollars each month.

Earning rewards using any gift card scheme is unlikely. Credit card companies have “wised up” to reward earning on cash-equivalent purchases, so this method is less about rewards earning and more about stop-gap measures to use a credit card as payment for a mortgage.

Impacts on Your Credit Score

One important consideration is that making a mortgage payment with your credit card could take up a significant amount of your credit limit. That could increase your credit utilization ratio, which is your total debt compared to your total credit limits.

That can create a ripple effect on your credit scores, driving them down and making borrowing money more expensive in the future.

Ideally, you want to keep your credit ratio low, preferably under 30%. But if you have a $10,000 credit limit and a $ 3,500 mortgage payment, you’ll drive that score beyond an optimal limit. 

Can You Use a Credit Card for a Home Down Payment?

Probably not. Home sellers and lenders do not accept credit card payments for down payments. And your card limit is unlikely to be high enough to accommodate such a large expense in the first place.

Lenders generally require that down payment funds have been in your bank account for at least 60 days to get seasoned.

You can still get around this using third-party apps by transferring money from your credit card to another account for a fee and then transferring the money to your account. You can also get a cash advance on your credit card.

Unfortunately, interest on credit card loans is much higher than what you’ll pay for a home loan, and lenders will probably ask you where the money for your down payment came from. You may be tempted to fudge the truth a bit, but that’s committing fraud and could land you in a lot of legal problems.

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