Should You Use A Credit Card to Pay Your Mortgage?
Buying a house is the most major financial decision we will ever make. It is the most significant investment in securing our future. Unsurprisingly, many of us are hesitant about using a credit card to pay for a large purchase like a mortgage. However, determining whether to use a credit card on this transaction may be a crucial option to decrease the interest incurred.
In some ways, using a credit card to pay your mortgage might save you time and money through trading off the debt if you employ the right technique, but it's not always a smart idea. Third-party payment providers may accept your credit card payment and then cut a check to your mortgage servicer, but the convenience charge you'll pay may be insufficient.
One decisive element in using a credit card to pay a mortgage is having a credit limit big enough to absorb your mortgage payment on top of any other costs you normally charge to your card. Another consideration is the worth of any prospective credit card benefits. Unless you're looking for a sign-up incentive, they are unlikely to be more than the convenience fees.
Why should you consider paying your mortgage using a credit card?
- Earning credit card rewards.
There are two credit card incentives: sign-up bonuses and recurring benefits. A sign-up bonus may provide you with $500 cash back if you spend $5,000 in your first three months as a cardholder. Recurring incentives may offer you 3% back on all purchases, even those made to receive the sign-up bonus.
- To obtain added time to pay the mortgage without incurring a late payment penalty from the mortgage company.
If you require longer than the 15-day grace period to pay your mortgage but want to avoid a late charge and credit score decline, you might pay your mortgage using a credit card on the 14th to buy yourself around 25 more days, provided you don't carry a deficit on your card.
- Take advantage by saving money and earning a few weeks' interests.
Taking advantage of the payment timeframe provided by holding your money in a savings account where it pays interest until your credit card due date may net you a few additional dollars. So, it's not a bad idea to make a purchase you were planning to make anyway, as long as you never pay late or carry debt.
The limitations of using a credit card to pay for a mortgage
One obvious disadvantage of using a credit card to pay your mortgage is the expense of the convenience charge. Another concern that is sometimes neglected is that paying your mortgage with a credit card can significantly raise your credit use and negatively impact your credit score.
Most importantly, credit card interest rates are often higher than mortgage interest rates. If you charge your mortgage to a credit card and then carry a credit card balance from month to month, your mortgage payments will be significantly higher than they need to be.
Final Verdict
In certain circumstances, an ordinary person will only gain from charging mortgage payments on a credit card. It would help if you located a third-party payment processor that would allow you to pay your mortgage company using a credit card. Additionally, you must receive credit card rewards greater than the payment processing cost.
