Bad Idea: Paying Your Mortgage or Rent With Your Credit Card

Struggling homeowners and renters may turn to their credit cards to pay their monthly living expenses – including the rent or mortgage. Statistics shows that more homeowners are making this decision. However, it may not be the wisest decision and you’re only postponing the inevitable when you rob Peter to pay Paul.

Only Charge What You Can Afford

One of the most important rules to follow is to charge only what you can afford to repay. Monthly mortgage and rent can be expensive. Odds are, if you have to put the charge on your credit card, you can’t afford to pay it. And if you can’t afford to pay it this month, what happens next month? Eventually, you’ll run out of room on your cards and you won’t have enough available credit to pay down the balance. With balances so high, you may get approved if you apply for a credit card to keep charging your balance.

If you charge your mortgage, you haven’t paid anything at all. Instead, you’ve just created more debt that you’ll have to pay back in the future.

You’re Paying Double Interest

When you put your mortgage on your credit card, you’ll be paying interest on the balance twice. Interest is already built into your mortgage payments. If you’re still early in your mortgage, your payment may be made entirely of interest. Putting the charge on your credit card means you’ll pay more interest on the balance and this time the interest rate will probably be higher.

Of course, rent payments don’t include interest, but putting these payments on your credit card means you’ll have to pay interest on them.

Credit Card Payments Become Unaffordable

Credit card minimum payments are typically based on the credit card balance. The higher your credit card balance, the higher your minimum payments will be. So, when you charge your mortgage or rent payment, your monthly credit card payment goes up. If you’re struggling financially, the increased credit card payment will put more strain on your budget.

Bad Credit Makes Renting and Home Ownership Harder

Paying your mortgage or rent is unsustainable. Unfortunately, it will only be a few months before you’re behind on your mortgage, behind on your credit card payments, and facing foreclosure or eviction. With a foreclosure on your record, it will be years before you can buy a home again. Add credit card default into the mix and you’ll even have a hard time renting a home since many landlords now run your credit report before they will rent to you.

If you can’t afford your mortgage, you’ll have to make some tough choices about your finances and about your living situation. Paying your mortgage or rent with your credit card might work for one month, but that’s only if you expect to see some kind of drastic income change in the near future. Otherwise, the fact that you have to make that kind of decision shows that there’s something deeper going on.