New programs for cash savvy consumers are now being offered by several credit card companies to make mortgage payments. Homeowners can now pay their mortgage with their credit card and potentially rack up a windfall of reward points that will earn them free trips and other large bonus perks.

For homeowners with no liquidity problems, the programs are similar to an interest-free loan, said Nessa Feddis, a lawyer with the American Bankers Association. “Basically, you’re paying your mortgage with your credit card on one date, and then you don’t have to actually have to pay it off until a couple of weeks later.”

American Express has partnered with American Home Mortgage and IndyMac Bank in 35 states and 200 cities to allow cardholders to pay their mortgage with a credit card, if they closed their mortgage with one of the two partners. Sarah Meron, a spokeswoman for American Express, emphasized that the program caters to people with strong credit and payment histories and does not include subprime mortgages. She said efforts were under way to seek more banks to participate in the program. Visa offers a similar mortgage payment program allowing people to pay their mortgage using a credit card.

Financial experts are not exactly thrilled with the scheme and are particularly worried about those already in credit trouble and advise that they stay clear of these offers. Cash strapped homeowners who are  squeezed by falling housing prices or rising interest rates may use their cards as short-term fixes to avoid losing their home may find themselves in deeper credit trouble.

“If you need a credit card to make a house payment, you’re a very distressed borrower and most likely you’re going to run into trouble,” said Paul Miller, managing director at the FBR Group.

Posted in Credit Tips, News & Info

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