Hull Financial Planning Personal Finance FAQ Series: Should I Pay My Mortgage With My Credit Card to Earn Rewards?

If you have a great rewards credit card, then it’s tempting to pay your mortgage payment with your credit card to earn the rewards. Does this plan work?

Take a look at the video below and find out what to do.

Should I Pay My Mortgage With My Credit Card to Earn Rewards?


Continues Below




The transcript follows.

If you have a credit card that gives you miles or money back, then it’s tempting to think that you can pay your mortgage with the credit card and earn those rewards. Nothing like getting a free round trip flight to somewhere in the world just for paying your mortgage for a year, right? This is the exact same question that we asked ourselves when we had a mortgage and a credit card that gave us 1% cash back on our purchases.

The problem with using a credit card to pay a mortgage is that the payment invariably will have enough fees associated with it to cause you to lose money doing so. There are two ways in which the fees will eat you up and make you spend even more money.

  1. Some credit cards will treat your mortgage payment as a cash advance. Usually, the cash advances come at a cost of 3% of the payment.
  2. Most mortgage companies will charge you a “convenience charge” for being able to pay your mortgage with a credit card rather than with cash. Again, this can run up to 3% of the payment.

The problem is that your costs will generally run at about 3% of your overall payment to be able to pay via credit card and your rewards are generally worth only 1% of your payment. Merchants have to pay between 1.5 and 3% to accept credit cards, so there’s almost no case where you’ll be able to make up the difference in the rewards you’ll accumulate for the “convenience.”

The best solution is still the old-fashioned way. Write a check, have the payment automatically deducted from your account, or pay in cash.

About Jason Hull, CFP®

Jason Hull, CFP®, is the Chief Technology officer of myFinancialAnswers, an online comprehensive financial planning service.

Close