Individuals facing financial difficulties have been utilizing their credit cards to make mortgage payments. Is this a good idea? At the end of the month, when the homeowner does not have sufficient funds in their bank account to make the mortgage payment, it is very easy today to make those payments with credit cards.
There is divided opinion among financial experts whether making mortgage payments with credit cards is a good idea. On one hand this can have a negative impact on the financial situation of the individuals involved. Since mortgage payments generally involve large sums of money, this creates a significant amount of credit card debt. The high dollar amounts of mortgage payments can cause credit card holders to max out the lines of credit on their credit cards. This causes increases in their minimum payments every month. This can also have a negative impact on the individual’s credit rating.
When there is insufficient cash flow to make mortgage payments, making more than one payment on a credit card is generally a bad idea. Should a family not have sufficient funds to pay all of their monthly expenses, the first payment they should make should be their mortgage payment.
Credit Card Interest Rates
Credit card interest rates are substantially higher than interest rates on mortgages. Mortgage interest rates have reached all-time lows of approximately 2 1/2% in recent months. However, credit card interest rates generally run between 12 and 24%. From an interest rate perspective, the long-term costs of the mounting credit card debt are much greater than the expenses related to falling behind on one’s mortgage.
Financial Emergencies
Credit cards are a valuable tool to deal with financial emergencies. Possibly the best solution to the question as to whether to make mortgage payments on credit cards would be to consider the family’s overall financial situation and how much making a mortgage payment on a credit card will increase the monthly credit card payment.
About The Author
Elliot S. Schlissel, Esq. is an attorney practicing law in the metropolitan New York area for more than 34 years. He assists his clients with regard to bankruptcy matters, mortgage modifications and foreclosure defense.
