Most mortgage lenders refuse to accept credit card payments to prevent a high rate of defaults by borrowers and avoid additional costs that can eat into their profits. With the proliferation of “fintech” startups, though, many homeowners are beginning to use credit cards to cover their housing expenses, including mortgage payments, even if it means paying extra fees.
Fintechs have helped consumers make sound financial decisions by creating more payment options. Because of the change in consumer behavior, paying extra for credit card processing for lenders can give you a competitive edge. Giving your borrowers the option to pay with plastic can empower them to take more control of their finances.
For starters, below are the main reasons homeowners want to make mortgage payments with credit cards.
Let us begin with the obvious: earning rewards. Consumers who can afford to pay a mortgage in full decide to use their credit card to get something more out of their purchases. They may be exchanged debt for another debt, but they do not put up with higher interest since they settle their credit card bills completely anyway.
Some credit cards provide attractive rewards to compel users to make bigger purchases. In one case, a couple used their Barclaycard Arrival Plus World Elite Mastercard to pay off the remaining $100,000 balance on their house. The purchase earned them enough reward points to fund a family vacation.
Raking In Signup Bonuses
Some homeowners like to pay their mortgage with plastic to take advantage of handsome signup bonuses. Since these perks are time-sensitive, they consciously make big-ticket purchases to meet the minimum spending requirement and get a lot of free miles, which can be several hundreds of dollars worth of travel.
Building Their Credit
Savvy homeowners use their credit cards to pay loans to beef up their credit history without necessarily increasing their level of indebtedness. They understand that high credit utilization can be harmful; they intentionally pay off their balance before their credit card statement is issued.
Holding on to Cash Longer
Many people do not want to depart with their cash several times a month. Some of them want to keep their money in savings accounts to earn interest while others do not want to pay their bills way ahead of their due dates to stay liquid and prepared for urgent financial needs. Being able to pay their home loan with plastic practically pushes back the due date of their mortgage payment, which can give them more weeks to settle it. This strategy is a luxury many homeowners love to have.
If you have late payments, your customers do, too. The memories of the last financial crisis are still fresh, which is why many homeowners want to pay their bills on time. Credit card mortgage payments allow many people to keep the specter of foreclosure at bay.
Providing the option to make credit card payments rewards responsible borrowers. If you serve low-risk customers, delinquency should not be an issue in the first place.