Real Estate Diary
Pay Mortgage by Credit Card
Mortgage lenders rarely accept credit cards. A payment rejection may adversely affect your credit rating if you attempt to pay a mortgage by credit card.
The credit card company might treat the payment as a cash advance, which will make you liable for interest immediately. If the credit card company approves the payment, it may count as a cash advance.
If you pay back the loan within the stipulated time frame (typically 55 days), you won't have to pay interest.
On top of what you already owe on your mortgage, you will be paying interest on credit card debt. A credit card can have interest rates of 20% or more, making it a very costly form of debt.
What are the reasons to pay a mortgage by credit card?
You might consider pay mortgage by credit card if you are having difficulty keeping up with your repayments or need credit card sign-up bonuses.
The use of a credit card could worsen the situation, so I recommend trying an alternative rather than using a credit card.
Loan issues such as being unable to pay your monthly mortgage repayments may be the cause for using a credit card as a method of paying your mortgage.
The time is right to get help from a credit charity, such as Citizens Advice or the National Debt Line if you are facing this situation.
Rather than falling into arrears before alerting your provider, it is better to be open and honest about your current situation. During a repayment holiday, you do not make payments for some time in the hope that the company will be able to help you. Your life may take a turn for the better if you get a breath of fresh air.
Rewards:
It is possible to maximize your rewards card points when you are trying to qualify for a sign-up bonus (some credit card providers offer a sign-up bonus if you spend a specific amount within six months).
A rewards credit card can lead to debt, and as the interest rates are so high, this would not be a good idea. It is best to pay off the debt each month – spending on interest quickly erases the value of the rewards.
Most of the time, a credit card's rewards, such as a bonus or cashback, do not cover any fees you will likely incur when you use it to pay your mortgage.
Your interest starts accruing the moment your billing statement expires, rather than after your grace period ends.
How it affects your credit score
To pay a mortgage by credit card, be sure you have enough available credit to pay your mortgage. A declined transaction may result in additional fees.
You may raise your credit utilization and damage your credit score if you charge your mortgage payment, especially if your credit limit is a small card.
Even if you can pay your mortgage with your credit card, you only want to do this if you can afford to pay your debt in full. Your mortgage payment already includes a certain amount of interest (which could be hundreds of dollars in interest if you are in the first few years of your mortgage). You will not want to pay more interest on top of that by carrying a credit card balance.