November 30, 2023

Can You Pay a Loan or Mortgage with a Credit Card?

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Last Updated on December 25, 2022 by David

As more credit cards offer larger welcome bonuses we try to find ways to hit those welcome bonus goals. One of those ways may be trying to pay a mortgage or a loan and while some lenders allow the payment of loans with credit cards, a lot of us will run into problems.

Can You Pay a Loan with a Credit Card?

Yes, but it will require you to jump through a decent amount of hoops. It is very rare to find a lender that will accept credit card payments directly so you will need to find a workaround and most of the time these workarounds aren’t free. Most lenders prefer cash or ACH transfers and they have good reasons. The biggest reason is the fees associated with accepting credit card transactions which as a consumer we don’t see and happen on the back end. Visa and Mastercard charge processing fees from 1.5% to around 2.5% while American Express charges 3.0% to 3.5%. It may not seem like much, but if a lender accepts payments for an entire 30 years of mortgage payments, it can end up costing them tens of thousands of dollars.

One of the options is to use a third-party company such as Plastiq. They specialize in paying bills with credit cards that you wouldn’t normally be able to pay with a credit card. They charge 2.9% per transaction which may not seem like a lot, but for every $1000, that’s $29 which can add up quickly. Plastiq also follows the terms issued by Visa, MasterCard, and American Express which means there are some things you aren’t allowed to pay for with some cards. For example, American Express does not allow loan or mortgage payments using any AMEX card through Plastiq.

Money Order

Another option is to buy money orders. The problem with buying a money order with a credit card is that it will count as a cash advance with a much higher APR than your normal credit card APR. In addition, there may also be fees associated with cash advances that will also be charged on top of the higher APR.

A workaround for this would be to use your credit card to buy prepaid Visa or Mastercard gift cards. The gift cards I’m talking about have the Visa/Mastercard logos that you usually see near the cash register by the giftcards when checking out at most stores. You’re able to use those to purchase money orders, but you will need to find a store that is willing to sell you one using a prepaid credit card.

Additional Fees

Another thing to consider is the fees other than the Plastiq fees like the interest rate on your credit card if the balance is not paid off.

Bottom Line

It may seem like an awesome idea that could technically earn you extra points, but only if you find a workaround that makes sense when it comes to the fees you pay vs the points you get back. In addition to having to find a workaround, you need to make sure you stay on top of the credit card bills as it’s easy to lose sight of the fact you are merely replacing one bill with another.

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Just trying to find that balance between work and personal life. See it all and do it all without breaking the bank and sharing everything I learn so people don't have to make the same mistakes.

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