What Are the Pros and Cons of Paying a Mortgage with a Credit Card?

The idea of paying a mortgage with a credit card may seem surprising to some consumers, but a number of people choose to use this strategy as a means of managing a mortgage more effectively. While there is the potential to use this tool in a way that ensures payments are never remitted late and possibly even make a little money off the transaction, there are also some potential drawbacks to consider before deciding to use this method on an ongoing basis.

One of the chief benefits of paying a mortgage with a credit card is the ability to make the payment on time, even if receipt of a paycheck is delayed for some reason. Consumers who have suddenly lost a job due to downsizing or are out of work for a few weeks due to an illness may also use this method to remain current on the mortgage. Doing so makes it possible to avoid late fees as well as notes on credit reports about slow or late payments that could have an adverse effect on the credit rating. Once the paycheck has arrived or benefits due to the ill consumer are received, a payment to the credit card company offsets the charge, essentially returning everything to normal.

Another potential advantage to paying a mortgage with a credit card is to take advantage of cash back bonus plans associated with some credit card accounts. In this scenario, the card is used to make the payment and the holder earns a fixed percentage as a cash back bonus for that qualified charge. Care must be taken to determine if a mortgage payment is considered a qualified purchase, and also to make sure that the amount of the mortgage payment does not exceed any limits that the provider places on the total amount of a given qualified purchase. Assuming that the amount of the mortgage payment does not exceed the allowed amount, and does constitute a qualified purchase, the bonus is applied to the account or sometimes even rendered in the form of a check at the end of the year.

While paying a mortgage with a credit card does have some advantages, there are some potential liabilities to consider. Not all lenders make it possible for homeowners to charge mortgage payments. When this is the case, it may be possible to go through a third party who accepts the charge then forwards the cash payment to the mortgage lender. In return, the third party normally charges a fee. While convenient, this does add cost to the overall task of paying on the mortgage, and also creates the potential for a payment to be delayed, resulting in the assessment of late fees.

Another potential danger with paying a mortgage with a credit card is failing to retire the amount of that payment each month. The temptation to simply let the balance ride for a month or two may create a trend that soon results in exhausting the limit on the credit card. Since that balance continues to accrue interest, the consumer is incurring interest charges associated with the loan on not one but two fronts, making the mortgage more expensive overall. Unless the homeowner is very disciplined when it comes to paying off the balance of the credit card every month, any benefits from using this strategy are quickly offset by the added costs and potential damage to his or her credit over the long run.