While American Express once offered a program that allowed you to make a mortgage payment with its credit card, the real estate bubble that burst during the first decade of the 21st century changed the rules that lenders were willing to live by. While paying a mortgage with a credit card may be possible in some respects, a borrower should carefully consider the consequences before taking this action.
How It Works
Many lenders won't allow you to make a payment by credit card. Lenders may be unwilling to allow you to convert secured debt, the mortgage, to unsecured debt, credit card debt. Some borrowers may try to go around this restriction by purchasing a prepaid debit card with their credit card or by using a third party. You may be able to use a cash advance check from your credit card company to make a mortgage payment. While American Express offered a program in 2007 to allow people to pay directly for the mortgage payment with a credit card, this program disappeared when the real estate bubble burst shortly later. Ditech, a division of GMAC, offers a direct program for its borrowers that allows the borrower to use a credit card offered by the company to pay the mortgage.
You may accumulate more reward points by using your credit card to make a mortgage payment. Paying with a credit card may be more convenient than paying with a check. It can also allow you to fulfill any contractual obligation if cash flow problems arise.
Third parties may charge additional fees that make paying by credit card impractical. Additionally, paying a mortgage with a credit card simply transfers debt around. You can also wind up with more debt at a higher interest rate if you don't pay off the charge within the grace period. Having more debt can lead to a decrease in your credit score. While mortgage interest payments are tax deductible, credit card interest payments usually aren't.
Each lender establishes its own rules regarding the types of payments that it is willing to accept. Some of the benefits of using a credit card, such as convenience and a faster delivery, may be achieved with the use of a bank draft or debit card transaction. Before using a credit card to make a payment, a borrower may want to do the math and determine if any rewards for the transaction are outweighed by the fees.
- Newsday: No Reward for Paying Your Mortgage With a Credit Card
- Mainstreet.com: 10 Things You Should Never Put on Your Credit Card
- Mortgage News Daily: Mortgage Payments and Credit Cards - Two Examples Of Creative Thinking
- MortgageLoan.com: Mortgage Breakthroughs: Pay With Credit Card
- Business Insider: Does It Make Sense to Pay Your Mortgage for Credit Card Rewards?
- Consumerism Commentary: Should You Pay Your Mortgage With a Credit Card?
Samantha Kemp is a lawyer for a general practice firm. She has been writing professionally since 2009. Her articles focus on legal issues, personal finance, business and education. Kemp acquired her JD from the University of Arkansas School of Law. She also has degrees in economics and business and teaching.