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Can You Pay A Mortgage With A Credit Card?
Are you using your credit cards a great deal these days? The coronavirus pandemic has left thousands of businesses shuttered and millions of Americans out of work.
If you’re one of them and are worried about how you’re going to pay your bills next month, you’re not alone. In these uncertain economic times, more and more Americans are using credit cards to get them through this crisis, until the lockdown ends, and they can get back to work.
The ability to pay parts of your mortgage on a credit card could be beneficial at certain times but it is very important to realize that you are paying debt with more debt if you do this. There is already an interest rate on your mortgage, and then to pay it with a credit card means you are going to be paying interest on that credit line too. This means that when thinking long-term, it is most likely not in your best interest to pay your mortgage bill with a credit card.
Though, there are exceptions to every rule. Maybe you are in a situation where paying with credit has become your only choice, and evidently, more and more people are finding themselves in that situation due to the current state of the world.
On top of adding more interest to your mortgage, there is another challenge when it comes to relying on credit cards: in many cases due to laws or companies’ policies, it is often difficult to pay some bills with them. One big monthly bill that can be difficult to cover on credit cards is a mortgage.
Many lenders state that they will not accept credit card payments on monthly mortgage bills. However, is this rule written in stone, or are there exceptions to it?
Let’s take a closer look to see if you can pay your mortgage with a credit card.
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Workarounds: Paying Your Mortgage with a Credit Card
In these unprecedented times, it is becoming more and more common to be in a tough spot financially. Many people have lost their jobs or are working less due to the pandemic, which in most cases means that they have lost their only source of income.
In addition to problems people are having with work, there is an estimated 61% of Americans that cannot afford an unexpected thousand-dollar bill. As the effects of the pandemic continue, this situation is getting worse. Overall, these statistics are clear indicators that consumers are in a tough spot, and are going to need more than ever to rely on unconventional methods to help tide them over to the effects of the virus and lockdowns subside, and they can get back to work.
So, where do you turn when you are living paycheck to paycheck and then out of nowhere that paycheck is gone? In many cases, this is when people are turning to credit cards to pay their bills. If you are thinking of going this route, please do yourself a favor and reassess all of your finances to make sure that turning to credit for your mortgage is the absolute last resort.
Further, once you start paying your bills and expenses with a credit card, make sure that you have a plan of action set in place to be able to pay off that debt quickly because next month’s bills will be in your mailbox before you know it, and then what will you do once that credit runs out? If you have no cash on hand and no credit to fall back on, then you are going to be in an extremely tight situation financially.
With all of that being said, if you still feel that paying some or all of your bills with a credit card is what you need to do for yourself and your family, you do have some options. Here are a few things you can do to cover your monthly house payments with a credit card.
Some innovative financial apps will allow you to use your credit cards to pay bills that normally do not accept credit card payments, including mortgages.
One of the most popular credit card-enabled bill-paying apps out there is Plastiq. Plastiq users can link their credit cards to their Plastiq account, then, for a 2.5% fee, use Plastiq to pay their mortgage.
Pay your mortgage with Plastiq.
However, you’ll have to have a credit card that allows its use for these sorts of payments before making use of this service.
Visa, Mastercard, and American Express do not allow their cardholders to pay mortgages using Plastiq; JCB, Discover, and Diners Club have fewer restrictions.
Going this way to make bill purchases makes the long-term effects very expensive because of all the fees that are incurred in these types of transactions. Remember, you already have the interest to pay on your home. Now, you are adding the interest that your credit company charges you, and on top of that, you are being charged an additional 2.5% fee.
If you find yourself doing this for three months straight, then you are going to build up a massive amount of interest on your credit card which you would then have to figure out how to pay off while still managing to pay your monthly mortgage.
If, despite all of those fees, you still feel that you have to go this route, then make sure that you are paying your mortgage this way for the minimum amount of time possible. Paying your mortgage like this for an extended period of time is really going to hurt you financially.
Overall, while mortgage payments with these third-party systems can be costly, you may be able to offset their processing fees a bit if your credit card has a rewards program.
Another option you can consider for paying your mortgage with a credit card is to use a prepaid card. Prepaid credit cards act somewhat like a debit card; you have to “load them up” with cash.
Once you do, many prepaid credit cards such as the American Express Bluebird card can be used to pay bills such as mortgages.
While you’ll still need to put money against these cards to use them, you won’t have to worry about the processing fees that services like Plastiq charge users for expanding the bill-paying capacity of their credit cards.
This is a much more plausible way to make ends meet in a tough financial situation. These cards typically offer a flat fee for loading the card, usually around $5. Looking long term, this is going to amount to considerably less in fees as opposed to using that third-party payment app.
However, remember that the money that you load up on these prepaid cards is money that was generated through a credit card. So, that is money that you will have to pay back as much as it is money that is accruing interest that can hurt you down the road. It is certainly a better way to go about this situation because the fees for a prepaid card are relatively low, but the long-term effects could be digging the debt hole deeper.
Indirect Approach: The Money Order
If you need to make your house payment using your credit card but don’t have a prepaid card or billpaying service, there are still ways for you to do it, albeit indirectly.
You could use your credit card to purchase a money order or a series of money orders. These money orders could then be mailed to your lender directly or brought in person to the bank to make your monthly mortgage payment.
While a bit more tedious than the other methods, money orders do not cost much and nearly any bank or lender will accept them, making this a great option for putting your credit cards to work paying your mortgage.
This is very similar to the method mentioned above about using a prepaid ctor to pay your bills. Depending on where you get it, the prices of purchasing a money order are likely to be similar to purchasing a prepaid card. You may be able to find money orders for a couple of dollars cheaper if you are willing to look around, but in the grand scheme of things, those couple of dollars aren’t going to do too much damage.
All in all, this isn’t a bad way to use your credit card to pay for your bills. It does require a couple of extra steps over the prepaid card method, but the two methods are equally as effective.
Why Can’t I Pay My Mortgage with a Credit Card?
There are two major hurdles to making your monthly house payment with a credit card. The first one is that many of the major credit card companies do not permit cardholders to use them to make mortgage payments.
Mastercard, Visa, and American Express all have rules limiting or prohibiting their use for mortgage payments.
Additionally, many of the major banks that issue these cards to consumers also prohibit their use for mortgage payments as well.
There is also an underlying reason as to why mortgage companies won’t allow for the use of credit cards for payment. This reason is that when there is a credit transaction, there will be credit card fees that could be charged to the mortgage company.
This is the exact reason why many delis or other small businesses require a minimum purchase in order to be able to use a credit card at checkout. It is essentially the same concept when it comes to mortgage companies. It makes it harder for them to see the benefit of lending you money if you are paying them in credit. This lessens any form of profit margin that they earn on the funds they have lent you and from a business standpoint, it doesn’t make much sense.
For those reasons, many lenders that issue mortgages to homeowners prohibit the use of credit cards for monthly mortgage payments. Overall, the mortgage and banking industry frowns upon the use of credit cards for mortgage payments, since it is essentially using a debt (a credit on your card) to pay another debt (the mortgage on your home, which the lender holds).
Paying off that debt with more debt is counterintuitive to the lending company because it lessens their ability for profit, and if they are not earning money off of the loans they issue to their own borrowers, they could run themselves out of business.
When Does Paying a Mortgage with a Credit Card with a Mortgage Make Sense?
Even if you can pay your mortgage with a credit card, doing so can be expensive.
The processing fees of third-party companies and the interest expenses associated with the credit cards themselves can make paying bills with credit cards cost-prohibitive.
However, there are times when it may make sense to pay your mortgage with a credit card.
For example, if you fear you’re going to default on your mortgage if you don’t use your credit card, then it is reasonable to use it; after all, you have no other choice.
Many of us are finding ourselves in situations where our backs are against the wall financially. Utilizing some credit in this situation isn’t the end of the world if you are actively looking for ways to fix your situation.
Additionally, if you can leverage a credit card’s introductory period or rewards programs to offset processing fees and other costs, using a credit card to pay the mortgage may make sense as well.
It’s possible to pay your mortgage with a credit card, and in some cases, it makes very good sense to do so.
However, before you start using your credit cards to pay the mortgage and other bills, make sure you have a good plan for doing so.
Otherwise, using your credit cards to pay big bills could leave you deeply in debt and worse off financially than when you started.
Ideally, this would be something that you would use as a last possible resort due to the fact that you are going to be piling up fees if you use credit to pay your mortgage. Though we are currently living in some unprecedented times, and this is resulting in us being put in situations that we have never been in before.