Credit Cards Rewarding Homeowners

Do you cringe when you think of using credit cards to pay for your purchases? You do if you’ve ever had excessive credit card debt and high interest rates! There is a new kind of credit card rewards program entering the industry – and this one can actually help you pay off your mortgage. The trick to rewards cards is to be sure you pay off your credit card balance in full every month within the grace period, so you avoid paying interest, late fees or finance charges on your purchases. Using a credit card in this way is the same as buying with cash – but takes discipline!

Mortgage rewards credit cards allow cardholders to earn money that will be applied to their mortgage principle – or saved for a future home purchase. As with any rewards program, the more you spend, the more you earn back in rewards.

Bank of America Home Advante reward credit card, you earn points for purchases. As you accumulate 5,000 points, you can redeem your rewards as a payment sent to your mortgage principle.

Citi Home Rebate Platlinum Select MasterCard

With this mortgage reward credit card, you can receive 6% cash back for using the card to pay for utility costs or for purchases for home improvement. The cash is applied to your mortgage, or if you don’t have a mortgage yet, it is credited to your statemetn and can be used later when you make a home purchase.

How Small Payments from Rewards Programs Pay Off Mortgage Faster

You might be wondering how small rewards from a credit card could actually help pay off a mortgage faster. If you look at most mortage amortization schedules, you’ll see that the first several years of mortgage payments are almost entirely applied to the interest of the loan. If you were to send even a few dollars more per month at this stage of the mortgage, you would actually start seeing the difference in the principle balance of your mortgage reducing, and the number of months remaining on the loan shrinking.

On average, a credit card rewards program may be able to send an extra $50 or so on a quarterly basis to your mortgage principle. Doing this would save you about four months on your loan term and well over $3,000 in interest.

As with any rewards program, you absolutely must stay on top of your payments to make the rewards worth it. Paying the balance in full each month within the grace period means you aren’t paying interest on your purchases and the rewards are not costing you anything. As soon as you spend more than you can afford to pay in full – you start losing out on the benefits of the rewards.