Normally, making mortgage payments with your credit card is a bad idea. The one exception, though, is when you’re chasing a rewards bonus on a new card, because there’s a scenario in which it can pay off—here’s how it works.
When to use a credit card to pay your mortgage
Most rewards cards offer spending bonuses that are worth somewhere around $1,200 in cash value, either as points or miles. These bonuses are typically based on a spending goal within the first few weeks or months of getting a new card. Picking a typical example: the Capital One Venture rewards card offers a reward valued at $1,020, provided that you use the card for $3,000 worth of purchases within the first three months of getting the card.
Since mortgage payments are often the largest, recurring expense that you’re going to pay anyway, why not use the plastic? As long as you pay off the card immediately, you can ensure that you qualify for the bonus.
There’s one hitch, however—most mortgage providers don’t directly accept credit card payments, so you’ll need to use a third-party service to make that happen.
How to make mortgage payments with your credit card
Currently, the only financial servicer that will let you pay off mortgages with your credit card is a company called Plastiq. They act as a middleman, charging your card and then sending a check or ACH payment to the mortgage provider. Unfortunately, they take a 2.85% fee on each payment. That means you’re paying $28.50 extra for a $1,000 mortgage payment.
Keeping with the Capital One card as our example, you’d qualify for the $1,200 sign-up bonus by charging $3,000 on the card, with an additional 2.85% transaction fee on top (if what you’re charging is that mortgage payment). If you had two separate mortgage payments worth $1,500, that total transaction cost would be $85.50. As a service fee, that’s nothing to sneeze at. Yet, it’s worth the cost if it helps you qualify for the remaining $1,114.
On the other hand, the transaction fees don’t work as well when you’re just chasing cash-back bonuses. Cash-back cards often offer 2% on all purchases, but you’d be losing money on Plastiq’s 2.85% fee, as an example.
It’s also worth repeating that making mortgage payments with your credit card only works when you pay off the balance immediately. Chasing bonuses with high-interest debt is not worth the risk, unless you’re sure you can afford to make the payments.