Why Would Anyone Pay Mortgages With Credit Cards?

By Xin Lu. Last updated 15 September 2014. 23 comments

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Today I received an email from American Express that advertised a program where you can earn rewards by paying your Indymac mortgages with an American Express credit card. I do not have a mortgage, but I read this email and wondered, why would anyone pay their mortgages with a credit card?

There are many reasons why paying mortgages with a credit card is a bad idea. First of all, the interest rates credit cards charge are typically very high. For example, the lowest rate I have on a credit card is 10.99% and the highest is 24.99%. So if you get behind on paying your credit card you would be paying interest on mortgage interest, and that is a double whammy of debt.

Second, mortgage payments are usually pretty big so if you do not have a very large credit line then the high balances you carry due to mortgage payments could lower your credit score.

Third, putting your mortgage on a credit card could give you a false sense of cash flow. I guess this is a danger in buying anything on credit, but by putting a large mortgage payment on credit you may feel extra rich and that could lead to more spending and debt.

Finally, there are often costs associated with paying your mortgage with a credit card. Most people who are charging mortgages are using the cash advance feature of the cards, and that carries very high transaction costs. I have seen others that charge 2.9% of the mortgage or a flat fee.

The only advantage I see in using a credit card to pay for a mortgage is if the rewards outweigh the costs. As with all reward cards, as long as you pay off the balance and do not incur any interest charges you do get a little money back. If there is a fee associated with charging your mortgage, you'd have to take that into consideration and make sure that the rewards will cover the fee in addition to giving you something extra back. This would only be advantageous to people who have the money to pay back the credit card every month.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

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Guest's picture
Kell

My sister runs all of her monthly expenses through her credit card and automatically pays off the balance at the end of the month. It gets her a few free flights around Australia every year! If you can afford it and have automatic facilities or at least a strong will power, it can be very rewarding.

Guest's picture

I use my card to pay for everything - mortgage, fuel, entertainment, etc.

In my case, the rewards quickly add up to free flights, etc. Most recently, I was able to purchase an iPhone for my wife using the points.

It's definitely not for everyone but if you're disciplined enough to manage your cash flow well, it works out great. When you add in all the protections that AmEx throws in, it helps give you pretty good peace of mind as well.

Guest's picture
Frugal Canuck

Actually, I am a person that pays my mortgage, car payment, utility bills, groceries, and pretty much anything else I can pay through my credit cards. I do this for one simple reason...to maximize the cash back and air mile rewards I receive.

Now this isn't an adventure for the poor budgeter or rabid spender. I am very disciplined. I take time every Monday evening (about 15 minutes) to pay my credit card...I use internet banking and make a payment for all that I charged on the card.

I have done this for a period of 5 years and the only penalty I once received was a $10 service charge for carrying a negative balance of .84 cents. I spilled coffee on a receipt and couldn't read the amount so I rounded to the nearest $...and apparently paid too much...and thus had a negative or credit balance for which my card charged me. A simple phone call to the card company gave me a one time waive and refund of this charge and a $5 'no hassel guarantee' payout!

I would warn...tread carefully...between home and work expenses I am charging about $8000 per month through on my card...one slip up and it could mean financial trouble.

Though to counteract that I do hold $8000 in easily accessible savings account. I believe that one should have cash on hand (or readily available) to equal their total credit limit.

Guest's picture
Melinda

How do you pay your mortgage and car loans with your credit card...isn't that considered a cash advance by the CC company and a fee is applied or interest begins accumulating immediately?

Would love to know how to start taking advantage of the $$ I spend on house/car!

Guest's picture
Guest

My adjustable rate mortgage was close to 9%. The amount I owed was low, so it wouldn't have paid me to refinance. (there are costs when you refinance.)

My credit card company offered me 2.99% fixed for the life of the loan. So, I maxed out the card and paid off my mortgage. I'm making extra payments on the credit card so I can pay it off soon and NEVER BORROW MONEY AGAIN!

Guest's picture
Benny

What is the name of your credit card and I want that deal!

Guest's picture
Guest

[My adjustable rate mortgage was close to 9%. The amount I owed was low, so it wouldn't have paid me to refinance. (there are costs when you refinance.) My credit card company offered me 2.99% fixed for the life of the loan. So, I maxed out the card and paid off my mortgage. I'm making extra payments on the credit card so I can pay it off soon and NEVER BORROW MONEY AGAIN! ] THAT'S what I was thinking but I have to get my credit good enough to equal my remaining mortgage balance (less than 20k), but when you file for bankruptcy THEY CAN'T TAKE YOUR HOUSE! Only extra cars or items worth more than vital basic needs. One car depending on your state worth 5-7000 dollars isn't collectible. Ditch a ton of clothing and crap so your assets are less than $2000 and you're set to pay a creditcard bill at your leisure but no sweat on repossession unless you can't pay your property taxes. The balance to choose is between low mortgage interest payments but include insurance and other escrow fees, or pay that on a creditcard account with higher interest but no thread of being kicked out on the street and get cash rewards for being responsible when paying ontime.

Guest's picture

sounds like im not the only one. I pay all my bills and buy everything on a credit card - then pay it off in full at the end of each month. If i had a mortgage, i would totally pay it the same way. Get reward points for free - but yea, this strategy only works for very organized and responsible spenders. For large purchases I've gotten a card with a year long introductory 0% interest and then just pay off the item within the intro period. I'm sure the credit companies hate me.

Guest's picture
Guest

you're fine if you have enough cash in the bank to pay off the cc bill at the end of the month

no one told you to spend more than your ability to repay, that's stupid regardless of how you decide to finance the purchase

you're going to pay your mortgage either way, you're gonna pay your credit card either way, so combine the two, get the benefits, and curb your excess shopping by having some of your credit unavailable to you

its a win win win

Guest's picture
AndyS

If you are already paying off your mortgage monthly with cash in your bank account, then it is actually benefical to use the credit card and get cash back or reward points from your mortgage payments. Because they are so big there is a very good chance you would earn yourself and family a free "reward points" holiday every year doing this. The key is pay off your credit card balance every month.

 

The other thing to try an do is pay off your mortgage quicker (eg use the cash back rewards towards your mortgage) as I wrote in a recent post, an extra payment once a year can make you pay off your mortgage 7 years earlier. Credit cards are a finanical tool that it missued can be very harmful. However if used prudently they can make you extra money so to speak.

 

Guest's picture
Guest

what happened to my valid comments about paying mortgage with a creditcard? It's all how you shuffle the cards and pebble under the cups but make sure you win not the credit companies who seek to suck you dry because of greed.

Guest's picture
Guest

Didn't happen. I just didn't recognize my own post like an idiot.

Guest's picture

If you are able to charge your mortgage, and you pay your bills from a high-yield savings account, you are getting additional time for the interest to compound as well. It isn't going to necessarily make for a huge windfall, but having an extra 21 days or so of interest is always a positive effect.

In addition, as was stated before, if you are going to pay eventually, why not earn the points and allow them to continue to accumulate for a while? It is also a siplification technique. The more you can put on a credit card, the more simplified it becomes when bills are due. Automatically have everything possible charged to the card, reduce the number of payments (and corresponding due dates), earn additional interest during the grace period, and simplify things for yourself.

In actuality the rewards are the standard 1 point for every $1 charged, not 1%. The reward conversion rate varies, but points can be transferred to any number of airline or hotel partners, or even exchanged directly for gift cards, products, servcies, etc.

Guest's picture
quaid

Mortgage is 2500 a month

I pay them and use my card that earns me airline miles.

2500 x 12 months equals 30,000 airline miles.

I take a free trip a year, just because I pay my mortgage with a CC.

Guest's picture
mich

How do you pay your mortgage with your credit card with no penalties? My mortgage is with Wells Fargo. I heard you can set up a money market and link it to your credit card and do it this way?

Guest's picture
JW

Not only do you get to use the float by paying the mortgage with your credit card. You get the rewards, whether they be miles, points, cash back. Assuming you full pay on time.

However, consider this: by paying your mortgage with a credit card, you get to turn secured debt into unsecured debt. Once Congress figures that out, they will probably start a new round of useless investigation.

After all, unsecured debt has a much lower priority in cases of bankruptcy.

Guest's picture
PhoenixM

Like almost everybody who has commented here, I too pay virtually all of my bills with my American Express card; not only does this bring me Rewards Points, but it also helps my credit rating in general, as the best way to build credit is to use credit. When I pay things with my card, I'm using the card in lieu of cash / checks that I'd prefer not to have to hassle with, not as a loan with which to buy things I can't afford. Thus, I pay off my American Express card every month, period.

I do not have a mortgage; I'm currently saving up money so as to buy my first piece of property one of these days very soon. But once I do have a mortgage, I'll definitely make my monthly payments via credit card if that option is available to me; why wouldn't I, since it's money I have to pay every month anyway?

I don't think the person who posted this blog really thought this through. Sure, a person who's paying a mortgage with a credit card because they don't have the cash for it is making a very big mistake. But a person who CAN afford his or her mortgage payment (the majority of homeowners, in other words) would do very well to make the payment with a credit card, and then pay the card off when it's due.

Guest's picture
Suz

When I got my first credit card, I used it to pay for everything. It was going fine, paying off the balance every month, until I had to change jobs and my pay dropped. Because I was putting it on credit card, it was fine for a while, but then my expenses began to wrack up. Because I was late with a payment, intrest rates went through the roof and my payments skyrocketed and I started paying only the minimum and living off my income above that. I ended up going into collections with the credit card companies.

Since then I've paid off the collection companies and I'm working on rebuilding my credit, but I'll never charge everything to my credit card again. I'm just grateful that I hadn't been charging a mortgage payment on that because it would have made my bills that much higher.

One of the comments suggested having enough cash to cover your credit line- I think that's really the only way to go. Thanks for the great idea. When I get my finances back around to good, I'll have to do that with any new credit cards I get.

-Suz

Guest's picture
rookie

Ok, I want to start putting our mortgage on a card! We pay everything with a Citi cashback cc, but we max out the rewards in just a few months. I am going to get an Amex Blue card for cashback, but I also like the idea of travel rewards to help with the costs of vacations for our family of 4.

Guest's picture
DJ

I've been an AMEX Platinum holder for several years now, I also hold a couple of credit cards that I use for certain things depending on their rewards and always pay off all my cards in full each month. No one in my family, including my parents, have EVER paid less than our full balance each month on any credit card/charge card. We treat them as alternatives to cash for which we can get rewards/cash-back as well as multiple layers of purchase protection, etc. My mortgage is my only debt and I easily pay it every month, but I would love the opportunity to put it on my AMEX. It is over $8k per month so that would be around an extra 100,000 points each year I'd get for no extra cost. You mentioned there was a one-time fee of $395 to enroll in the program, I haven't heard of that before for the other mortgage companies that allow payment through AMEX but even if it is the case it would still make sense.

Guest's picture
Guest

More info on the elusive black amex card can be found on this website http://www.the-blackcard.com

Guest's picture
GroundPig

It totally makes sense to pay your mortgage with a cashback credit card, assuming you pay off your credit card in full and on time. However, some banks simply do not allow it.

Guest's picture

This is a horrible option unless you are paying it off every month and are getting some pretty hefty rewards.