Many well meaning consumers have dug themselves into a deep pit of financial despair simply by attempting to outsmart their credit card company and collect some additional points. Often times the collateral damage suffered is simply not worth the cash back rewards or extra miles earned from increased usage. If you are seriously considering making your mortgage payment with a credit card, ensure that you seek sound financial advice before committing. Prerequisites are an intimate knowledge of the financial ramifications, as well as a close attention to detail.

Contact Your Mortgage Company

Researching the value of points earned, interest fees, and cash flow scenarios may be a moot point. Not all mortgage companies allow for payment via credit card. If your lender’s website is unclear on this policy, contact them by phone and ask about the payment options that they accept. Once you have validated that payment with a credit card is a viable option, you will want to proceed with some additional research to determine if it’s a good idea for your financial situation.

Determine the True Value of the Rewards

As a general rule of thumb, the maximum cash back reward that you could expect to earn is around 2 percent of charges made on the card. If your mortgage payment is $1,000 per month, this could translate to $20 per month in cash back rewards in your pocket. Not much, but, it is dinner or a movie. But be careful. That $20 could cost you more if you don’t pay your credit card balance in full each month. This is where the attention to detail becomes important. But what about airline miles? Some credit card companies provide airline miles equal to the dollar amount that you charge. In this scenario, that same $1,000 per month mortgage payment could earn you 1,000 airline miles per month. Over a year along with other charges, you could earn enough miles for a free airline ticket. This again assumes that you pay off the balance every month so that you are not assessed additional fees and interest. Getting the most points or miles out of your credit card company is a game of sorts, and unfortunately, the house often wins.

Determine the Financial Impact

Earning credit card points and rewards can be great, but certainly not at the expense of damaging your credit score. Once the damage is done, it can take quite a while to repair and fully recover. Your credit score is determined by a number of factors. Paying your bills on time is definitely an important component of your FICO score, but so is your overall credit utilization. If your mortgage payment will eat up over 40-50% of the credit line on that credit card, a regular recurring payment could cause more harm than good. Conversely, a large and regular charge to the card along with corresponding payment in full could cause the credit issuing bank to increase your credit line, thus, helping your credit utilization percentage and overall credit score. Weigh your specific scenario carefully before making a decision.

Determine When It’s a Good Idea

With all the risks, is it worth that risk simply to accrue points or miles on your credit card? Keep in mind that protecting your credit score can be difficult in tough economic times. Paying your mortgage on time is one of the most important things that you can do to improve your credit score. Using a credit card to make your mortgage payment can actually help you accomplish this goal, but only if done so responsibly. If your monthly income fluctuates to the extent that it can cause that payment to be made in a timely manner, paying with a credit card can help to even out lean financial months. This strategy should only be a short term one as ideally, savings should be built and maintained so that monthly expenses can be comfortably covered without having to play a float game with the bank.

Choose the rewards that’s right for you. Some give out free airline miles. Others have product catalogs that allow you to cash in points for gadgets. Others even offer cash rewards. There’s no reason to get cards that offer stuff that you don’t use (like airline miles if you don’t travel at all).

Know the fees. The tricky side to getting a credit card is the fees. They have fees for just about anything. You might be getting free rewards but you might simply be paying for these thanks to the fees. The annual or membership fee alone may not justify getting the card for the sake of the reward.

Manage your spending. Credit card companies dole out these rewards for ultimately just one thing – to make you spend more. The framing points as rewards conditions you that you are getting something free. This may not be the case. This will only be the case if you don’t pay anything more than what you actually spend without the card and paying with cash.

Pay in full. To avoid the credit card debt trap, make sure that you only spend on things you need. Pay the balance in full monthly to avoid interest. Try to get a credit card that doesn’t charge annual membership fees. This way, you get points and rewards for just using their card as substitute for lugging around cash.

Just last month, Sony’s PlayStation Network got hacked and hackers were able to obtain users’ data – information that included names, gender, birthdates, addresses, and credit card information. 100 million users were affected.

With identity theft a growing concern, not too many people seem to be paranoid with their personal information.

While steps can immediately be taken to ensure that the card numbers are reported to credit card issuers, there’s still the lingering risk that someone out there has your personal data.

Sony, however, says that card number information and passwords have been “hashed” for security purposes which means hackers would not easily and readily decipher the information.

With identity theft a growing concern, not too many people seem to be paranoid with their personal information. Keep in mind that the amount of information that we store electronically, not to mention make public online, are the same pieces of information that’s used by banks and other institutions to verify you identity.

Having baddies get a hold of these is pretty much like writing your ATM pin on the card itself. They’re just blunders waiting to happen.

Do you gamble or make speculative investments without your partner’s consent?

Once you get married, your finances become conjugal. In this sense, proceeding with high-stake ventures without the consent of your significant other is a betrayal – both emotionally and financially. For a relationship to grow and move forward, both parties need to learn how to be transparent.

Do you have bank accounts or credit cards your partner doesn’t know about?

If you have deliberately chosen to keep some of the financial aspects of your life in secret, this might be indicative of a lack of trust and communication between couples. You should be able to discuss these things early in the relationship to better guide your financial lives.

Do you cover up market losses, rather than bringing them to your partner’s attention?

This doesn’t mean that you’ll have to report even the slightest dip in your portfolio. A loss is inevitable. This means that when the loss becomes significant, you should be able to communicate the problem to your partner well. Remember that a major loss is his/her loss too.

Do you hide purchases from your partner or fib about how much you actually paid for them?

If you know that your partner will be disappointed to hear the price of an item, yet you bought it anyways, then you’re committing financial infidelity. This becomes more upsetting when your partner thought you share mutual financial goals, but you seem to be not doing your share to realize them.

Do you put off or avoid discussing financial topics with your partner?

This isn’t really financial infidelity. But assuming that money becomes the main reason for fights and discussions, putting off or avoiding the topic will just lead to more misunderstandings in the future. It’s not fun discussing financial goals and problems. But it’s one sure way to make the relationship work.

http://www.investopedia.com/articles/pf/09/financial-infidelity.asp

Do the math. How much do you still owe? This includes credit card debt, car loans, and the mortgage. See how much you’re in the hole and calculate how much you pay.

Pay them quick. For smaller debts like credit card charges, it’s best to deal with them straight away. Pay the whole amount and never settle for just the minimum payment. Interest kills.

Some credit cards offer charge transfers from other cards for less interest. If you can, consolidate them under one card so you only have to manage one account. Then cancel accounts and cut up those other cards.

Work out how much extra you can pay. For larger loans like car loans and house mortgage, work out how much extra you can pay each month. Trimming off extra years or even months on the term means less money lost on interest.