These services charged fees for the convenience, and looking back, they were probably only offered because people couldn’t keep up with their mortgage payments.
Unsurprisingly, these services seemed to disappear as quickly as they surfaced, but there are still options to pay the mortgage with a credit card each month free of charge.
The difference today is that this method/idea is more about earning credit card points (or cash back) for paying your hefty mortgage payment, not so much about simply paying it.
Let me preface this by saying it makes no sense to pay your mortgage with a credit card if you can’t afford to pay it otherwise.
The only purpose of this method is to earn points and/or cash back as you would on other purchases made with a rewards credit card.
You Can Pay Your Mortgage with American Express Serve
Perhaps the easiest method I know of involves American Express Serve, which is referred to as a reloadable prepaid account.
In reality, it basically works like an online bank account in that you can transfer/load money to it and then pay everyday bills or make purchases with the associated prepaid card.
Let’s focus on that paying bills part. Your mortgage is a bill and it must be paid each month until maturity, just like other recurring bills.
But loan servicers don’t give homeowners the option to pay with a credit card (for good reason!) unlike most other bills.
The Serve method entails loading the account with a credit card, and then using the funds to pay your mortgage. I suppose you can use a debit card as well if it earns rewards.
The purpose of this is to get rewards on that large amount of money spent, so if the credit/debit card doesn’t earn rewards, there’s no point in doing this.
And you need to pay off your credit card in full each month to avoid any interest or fees to offset the benefit of doing it to begin with.
A couple warnings/issues with this method:
– You need to make sure your credit card issuer doesn’t charge fees to load Serve (American Express warns of this possibility on the website)
– The max you can load with a credit or debit card each month is $1,000 ($200 per day)
– The limit increases to $1,500 a month ($500 daily) if you get Serve with Softcard, formerly known as Isis Wallet
– You actually need to pay off the credit card charges to avoid interest/fees
As noted above, you can load your Serve account with a credit card, but even American Express warns that you could be charged fees by your card issuer for doing so.
I’ve used a Chase credit card and there was no fee or issue. It just showed up as a standard purchase.
But to avoid any mishaps, testing with a small amount or asking your credit card issuer to lower your cash advance limit to zero (or as low as possible) might be a good idea before giving it a whirl.
Once the necessary funds are in the Serve account, you’ll be able to see your available balance. Assuming it’s sufficient to cover your full mortgage payment, you simply select “Pay Bills” from the dropdown menu then add a payee.
While certain payees are already in Serve’s system, you’ll likely need to add your loan servicer manually, including their address and your loan number.
It should be the address where you would send a paper check because Serve is basically cutting a physical check on your behalf. It’s essentially a bill pay service. This is exactly why it works.
You’re not actually paying your mortgage with a credit card – rather, you’re funding an account with a credit card then sending those funds to your servicer via check, a much more accepted form of payment.
Once you save the payee information, you can make your mortgage payment via Serve each month. There’s even a memo section where you can write your loan number and any other details to ensure the payment is processed properly.
Note that payments can take several business days to process, so it’s not as quick as making a payment online. Fortunately, mortgage due dates are fairly flexible. But you’ll want to give yourself a cushion to avoid paying late if anything goes wrong.
The Downside to This (or Any) Method
While it’s kind of cool to pay your mortgage with a credit card, it does require some work, as noted above. And if you have a jumbo mortgage payment, this method probably won’t work very well given the low funding limits.
You certainly won’t want to send partial payments and find out that your loan servicer paid down your principal or simply returned your check.
Sure, you can load money from a credit card and bring in the shortfall from a checking or debit card, but at that point it might not be worth your time and energy.
After all, how much will you really “earn” from using a credit card. If your monthly mortgage payment is $1,000 a month, this method should work out okay.
But that would only equate to 12,000 points or miles annually, which is worth maybe $120 or slightly more if redeemed for travel or something more lucrative.
The earnings could also be used to pay down your mortgage a little bit faster if you put it toward the principal balance.
In that sense, it could be worth it. Just be careful not to miss a mortgage payment in the process.
source: thetruthaboutmortgage.com
