Credit cards are a great way to earn miles and points for free and discounted travel or cash back, but credit card purchases are usually limited to brick-and-mortar shopping and online purchases. In some cases, you can easily add your utility bills in there to earn even more.
But how about what is likely your biggest expense each month: your mortgage or rent? There are options to pay these expenses with a credit card, but you have to be careful of the fees or it may not be worthwhile.
Is paying rent or mortgage with a credit card a good idea?
Before we answer the question about whether or not you can pay your mortgage or rent with a credit card, let’s talk about if you should. Like the famous Jurassic Park scene, it is important to take a moment to think not whether you could, but if you should.
The benefits of paying rent or a mortgage with a credit card would be to increase your credit card spend, giving you a portion of your payment back in the form of cash back or travel miles and points. Let’s say those benefits are worth 2% of the payment value. In this case, it does make sense to pay with a credit card, but only if the fees to do so are less than 2%.
The only time it would make sense to spend more than you earn back is if you are trying to reach a spending milestone for a new credit card bonus. For example, if you have to spend $5,000 in three months after getting a new card but don’t spend that typically, it may be worth a small cost to reach the $5,000 mark and earn your big bonus reward.
Also, it is important to understand your own habits with credit. You should avoid spending heavily on credit cards if you don’t have good credit habits. Only charge as much as you can afford to pay back in full each month. If you can’t stick to that, the interest costs far outweigh any rewards.
So now that you know the risks, the short answer is yes, you can pay your mortgage or rent with a credit card. Now it is time to decide if you should.
How to pay your mortgage or rent with a credit card
Every time you pay in a transaction, the credit card companies take a percentage of the sale as profit. Your cash back and travel rewards actually come from this slice of the pie, which is often around 2% to 3% of the purchase. Most stores and restaurants just mark this up as a cost of doing business, and landlords and mortgage companies typically just say no to credit cards because they don’t want that fee to eat away at their profit margins.
However, that doesn’t mean you don’t have options to pay with a credit card. These methods may include you incurring some or all of the credit card processing fees, if not more, so you should only use these methods when the math works out in your favor. Typically, that is only when there is some sort of special or if you are trying to reach a credit card signup bonus before the deadline.
Most popular options to pay rent or mortgage with a credit card
Landlord payment systems: If you live in a large apartment complex or a building operated by a big management company, you will probably have an option to pay your rent with a credit card. Just beware that the payment processors are usually 3rd parties who also want to make money, so you may easily find yourself paying more than 3% in fees. This will generally only make sense if you are trying to get a bonus and don’t want to sign up for another service to get there.
Plastiq: Several companies have come along that allow you to charge an item as a purchase and they in turn pay your bill for you. The most popular of these is Plastiq, which allows you to use Visa, Mastercard, American Express, and Discover cards among others (including pre-paid gift cards). Plastiq sometimes offers promotions on certain cards or for some specific payments. Processing costs are up to 2.5%.
Beware cash advance fees
One last word of caution: Beware of cash advance fees. If you do try to use your credit card to pay bills, it may be coded by the credit card issuer as a cash advance. If that’s the case, you will not get any rewards and the purchase will also lead to cash advance fees. This is the worst case scenario for someone who pays off their cards in full each month when trying to pay your mortgage or rent with a card.
Always read the fine print and even consider a web search to see if others have had their charges with the provider you have in mind coded as a cash advance so you know if you should avoid it.
Use your credit cards to make money
If you do things right, your credit cards are a great tool to help you travel more, or at least get a little cash back on purchases. Just make sure you don’t accidentally miss a payment or make a purchase that turns out to be a cash advance. If you do the math and everything checks out, you may find a very good reason to pay your rent or mortgage with a credit card.
RELATED: What is a ‘good’ credit card?