Richmond Savers
  • Blog
  • Free Disney Trip Plan
  • Guides
  • Top Credit Cards
  • About
  • Contact

How to Save Money on Your Mortgage by Paying with Credit Cards

January 19, 2017 by Thomas 4 Comments  Richmond Savers has partnered with CardRatings for our coverage of credit card products. Richmond Savers and CardRatings may receive a commission from card issuers.

Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.

Plastiq for Mortgage PaymentsHomeownership is expensive, so if you’re like me you actively look for ways to make it more affordable. Doing so will make maintenance and other upgrade costs more feasible and help you achieve financial independence more quickly. You may already be getting a tax break from your interest payments, depending on where you are in the midst of your repayment and if itemizing makes sense, but either way you can drive up the savings if you use a credit card and earn rewards. I know what you’re thinking: “But, you can’t pay your mortgage with a credit card!”

While that is historically true, it’s no longer the case thanks to a service called Plastiq that can process this payment for you with minimal fees. Plastiq says that “Any business can be paid through Plastiq, even if they don’t accept cards.” This presents a real opportunity to leverage your mortgage payment for serious savings in the form of credit card rewards. Combined with the mortgage interest deduction you may already be taking, the savings can be significant.

Note, these calculations were made when the referenced cards had particular bonuses and annual fee info which have all since changed or are no longer available.

Our Hypothetical Scenario

Some of the math below references the tax deduction, but even if you don’t itemize keep reading. Total savings in both cases is listed at the bottom. Let’s say you have a mortgage payment of $1,300 and paid an average of $800 per month in interest on your home in a single tax year, so $9,600 total in interest over the year. For the tax deduction, that would mean a maximum savings of $2,400 at the 25 percent tax bracket, and here’s a full list of 2016 brackets, showing maximum savings with $9,600 in interest:

Tax RateMax. Tax Savings
10%
$960
15%$1,440
25%$2,400
28%$2,688
33%$3,168
35%$3,360
39.60%$3,801.6

But what if you also earned rewards on each dollar you spent on interest? That would give you “stacked” savings, and would be easy to do if you were working toward minimum spend for a signup bonus each time you paid your mortgage through Plastiq.

There are many credit cards that offer significant bonuses that can be redeemed for cash back. In this post, though, I’ll assume the use of a few particular cards that offer some of the best current cash-back bonuses (at the time of publishing — these cards may no longer exist or have different bonuses now) and whose offer details are pretty similar.  Those cards are the Capital One Spark Cash for Business, Capital One Venture Rewards Credit Card, Barclaycard Arrival Plus® World Elite Mastercard®. In the math below, I’ll assume that you use one of these card each quarter for a whole year, using your mortgage to meet the minimum spend on each.

One important thing to remember is that the cash value I’m assuming for the Barclaycard and Venture Rewards card is for travel redemption. If you would spend that money on travel anyway, then this is effectively cash back.

Total Spending and Savings

I won’t go into all the cards’ specific details on spend requirements, but for simplicity’s sake I’ll average the spend requirements and bonuses, so we can stick with a quarterly plan. Doing that, these cards will require a total spend of $15,500 to earn the bonuses (an average of $3,875 per quarter), and the bonuses will be worth $1,938 in cash back. After the Plastiq fees, the bonuses are still worth an impressive $1,550!

Each quarter, you would put $2,400 worth of interest on each one and $3,900 total from your housing expenses. That’s enough to cover the “average” spend requirement, though in two quarters you would need a little supplementary spend to reach the bonus (depends on the card you’re working on). And you’d end up earning an average of $484.5 in cash back each quarter, minus 2.5 percent of $3,900 in Plastiq fees ($97.5), for a grand total of $387 each quarter in cash-back earnings.

Now, if we want to get technical, we can determine what proportion of that cash back was earned specifically by the interest payments. This makes the thought experiment a bit more interesting, in my opinion. We’d need to know the exact payments each month for this to be perfect, but we can still come close using the $2,400 average quarterly interest. Since $2,400 is 61.5 percent of $3,900 it’s fair to say that it earned 61.5 percent of the cash back, which is equal to $238 per quarter and $952.02 per year. That makes for a total tax savings of $3,352.02 directly from your mortgage interest at the 25 percent tax bracket! And a total savings of $3,950 when you take the tax deduction and pay your mortgage with a credit card according to this plan.

And even if you don’t take the tax deduction, you’re still earning a whopping $2 in tax-free income by paying for your mortgage, and just a few other expenses, through Plastiq with this plan. Now, I know there’s room for debate about whether cash back is the best use for the points you earn, but that’s another topic for another day…

A Simplified Method

There’s also a much more simplified method for earning points via Plastiq and your mortgage, though the savings will be significantly less. Rather than working toward minimum spend, you could use a flat-rate, everyday card such as the Discover It Miles. This card earns a baseline of 1.5 percent back, but then those earnings are doubled (matched) at the end of your first year of card ownership (1.5 x 2). (Plus, you can earn this for two years if you have a spouse and stagger). This is higher than Plastiq’s standard 2.5 percent fee. And Plastiq now accepts Discover as payment (effective November 2016).

If you paid your mortgage for a year using Plastiq ($15,600), you would incur $390 in fees (2.5%). However, you would earn a total of $468 in cash back or travel rewards via the Discover card. This essentially means that there’s a pretty easy way to save $78 per year on your mortgage! Plastiq also occasionally offers promo rates, so if you can jump on one of those opportunities, you’ll save even more.

Have you tried Plastiq? If so what did you think?

Get Our Best Tips Sent to Your Inbox

We'll Help You Slash Your Budget and Travel for Free

Richmond Savers has partnered with CardRatings for our coverage of credit card products. Richmond Savers and CardRatings may receive a commission from card issuers.

Filed Under: Taxes

Take Your Family to Disney for Pennies on the Dollar!

We did it, and you can too. This guide will show you everything you need to know.

Want more help? We'll walk you through all the steps for free in our program called Keys to the Magic Kingdom Challenge. Join now here -- we're taking the first 500 families who sign up.

Comments

  1. Syed says

    January 19, 2017 at 4:33 pm

    This is great stuff! Very valuable if you’re looking to get a sign up bonus. Will do this for next months payment on my Business Gold card

    Reply
    • Thomas says

      January 19, 2017 at 5:45 pm

      Awesome, Syed. Hope you’ll let us know how it goes. Since mortgage payments are such a big expense, this is an awesome opportunity.

      Reply
  2. Jason says

    May 25, 2017 at 9:15 pm

    Great tip, I am in the same boat as many of the readers trying to meet min spend. Got the Chase Ink Preferred and AMEX SPG recently and trying to finish meeting min spend. I used Plastiq and my mortgage payment went thru in 5 days (even though they indicated 7 days). There is huge bonus from Plastiq lately to use for your minimum spend requirements by using it to pay for your mortgage. You can get $500 FFD (as May 25, 2017). I have been using it as last resort to meet the min spend. Appreciate if readers also using my link please.

    Reply
    • Thomas says

      May 28, 2017 at 7:08 am

      Jason,

      Thanks for your comment and insight here! I edited out the referral link, as we aren’t set up to accommodate that for everyone. Perhaps someone interested can reply to you and exchange email addresses, etc.

      Reply

Leave a Reply Cancel reply

CommentLuv badgeShow more posts

Start Saving with Our Free Toolkit

We'll show you how to save an additional $2,000 this year with five simple tools.

Welcome to RichmondSavers.com

Our Family Picture

We're Brad and Laura Barrett and our entire family wants to thank you for visiting!

We love saving money and we found an easy way to save $4,000+ on our Disney World vacation using credit card rewards points.

Read the step-by-step plan that's been featured by the NY Times, NBC, CBS & ABC:

Most Popular Articles:

  • Take your family to Disney World (nearly) for free: Step-by-Step Instructions
  • The Essential Rewards Credit Card: Chase Sapphire Preferred
  • AMEX Waives Annual Fees for all Active Duty Military Members
  • Booking with a Travel Agent: Save Big by Using the Right Credit Card

Get The Best of Richmond Savers Sent to Your Inbox

We'll Help You Slash Your Budget and Travel for Free

Disclaimers

This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through the credit card issuer Affiliate Program. RichmondSavers.com makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis. Richmond Savers does not include the entire universe of available financial or credit offers.

RichmondSavers.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Copyright © 2021 RichmondSavers.com | Privacy & Terms | Contact