Your Mortgage + Credit Card = Bad Idea


Times are tough, but are they so tough that you should pay your mortgage with a credit card?

The short answer is that yes, you can – but perhaps the better question is “why would you want to?”

For starters, mortgage companies frown on you paying your monthly mortgage bill with a credit card. Because of card interchange fees and the normally large payment amount, usually lead lenders to reject card payments.

But in the last few years, online mortgage payment services like ChargeSmart, which boasts a credit card payment network with hundreds of lenders like Bank of America (StockQuote: BAC), HSBC (StockQuote: HBC) and ING Direct (StockQuote: ING), allow consumers to pay their mortgages with credit cards.

American Express (StockQuote: AXP) also has a program that enables its card customers to pay their mortgages with an American Express card. But the program is only for the company’s most affluent customers and it costs $400 to enroll.

But for most homeowners, using a credit card to pay off a mortgage is a bad idea.

Why? For starters, mortgages already come anchored to usually ample interest rates – but unfortunately, so do credit cards. In many cases, you’d be paying interest on your credit card to pay off the interest on your mortgage. If there’s a quicker path, then please let know.

Also, if you make a big mortgage payment using a credit card and you’re paying your card bill at the end of the month, you run the risk of having your interest rate skyrocket (credit card companies love to pump up interest rates on late payers). In addition, the increase in your card balance could lower your credit score.

The only way using a credit card to pay off a mortgage might work is to make the payment, then pay off the card bill within 30 days. Ideally, you wouldn’t charge anything else on your card that month. Keeping your card balance down in a month where your mortgage payment appears on your card bill is a must.

Otherwise, using a credit card to pay a mortgage bill is a losing proposition.

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