Paying mortgage with your credit card
So what’s the Big Deal anyways?
Well, the Big deal is that your mortgage is probably one of your most significant monetly expenditures and if you read this post you know that in order to increase your chances of booking your family travel with least out-of-pocket cost you should be utilizing your credit card spend and putting as much on your charge card as you can afford1. Banks do not want to accept credit card payments on their mortgages because they have to pay credit card companies swipe fees, which typically are somewhere between 1-3%, and considering how low some of today’s mortgage rates are that will completely eat into their margins. And even if they will consider a credit card payment they may charge it as a cash advance2, which is obviously a no-go.
There are a few enterprising business out on the internet that will allow you to make a variety of payments, including mortgages, daycare, etc., with your credit card. The catch? They’ll charge you 2.5% doing so. Considering I’ve written may times about what a point/mile is worth, 2.5% redeption rate is about as good as you can expect to redeem at, and most of the time you’ll have to hunt for that deal. Sometimes it’s obviously possibly to exceed the 2.5% and go as high as 6% or even double digits, but at that point you’re redeeming for very expensive first class travel that you probably wouldn’t think about purchasing in the first place, so unless you’re looking for an aspirational trip I’ll end my argument here.
So what can you do? One of the few things that you can do on your end is to lower or game the charge fee that you’ll pay. While these 3rd party processors won’t discount their 2.5% you can use credit card category bonuses to effectively lower that rate. My personal suggestion would be to do this through One Vanilla Gift Cards:
There are a few grocery, pharmacy and gas station chains that if you look long enough will allow you to buy these with a credit card. Considering that these gift cards cost another $5.95 to purchase independent of the amount of money you load on there, the only economical way would be to purchase the maximum $500. So now you’ve paid $5.95 to buy this card and you’ll end up spending another $12.50 (2.5% fee) spending it through a 3rd party portal, totaling almost 3.7%, this doesn’t seem like a good deal at all… The reason I mention grocery, pharmacy or gas station stores is because these typically offer bonus award points through credit cards. For example Chase Ink card will allow you to earn 2 points for all purchases made at gas stations, American Express Everyday card (if you max out your 30 purchases a month) will earn you 3 points at gas stations. As I already wrote, Amex points are worth somewhere around 2cents a piece, so you’re looking at close to 6% return rate for every $1 spent at a gas station. Putting this all together now you can see that you can cover the 3.7% fee with the 6% you’ll be earning and you’ll be actually coming out ahead by 2.3%, meaning you’ll be paying your mortgage on your credit card at a 2.3% discount that you can use toward travel.
Keep in mind that costs will add up on all these fees, so for example if you put $5000/month spend through this method you’d earn 180,000 Amex points but you’d also be paying $2,214 to inquire them. Considering that 180,000 Amex points can be redeemed for at least 7 domestic round trip tickets (which easily value at $450 a piece) or you can fly two people round trip to Europe and still have close to 2 round-trip domestic tickets left this doesn’t seem like too bad a of a deal. And you’re spreading out these costs throughout a year, so if your family’s flight budget is somewhere around $1000-2000 a year you may want to consider this method in order to get even more value out of your spend.
I don’t condone going into depb on your credit card, if you can’t afford something in the first place you should not buy it on the credit card, but if you can afford it you should be trying to charge as close to 100% of your spend to reep rewards ↩
stay away from these, a cash advance earns you no points/miles on your credit card and is treated purely as a cash transaction upon which you owe bank fees. ↩