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Credit Card That Pays Down The Mortgage
June 25th, 2007 by 
investoid
When I received my mortgage documents last week there was a credit card application included. It’s for the First National MasterCard with Worldpoints. Like many other points programs, you accumulate points on purchases made with the card and they can be redeemed on various things, such as household items or trips around the world. But this card can also do something else - pay down the principal on your mortgage.
For every $125 you spend on the card, you can pay down the principal of your mortgage by $1. So if you spend say $5000 a year on your card, then you can put $40 down toward your principal. While this may not seem like a lot, the savings in interest over time can be quite large. You can pay down the mortgage principal at any time and as many times as you want.
The catch? For one, there’s a $30 annual fee on the card, so you better be spending more than $3750 on the card each year or else the savings is a wash (just put the $30 against your mortgage). Also, if you end up carrying a balance then you’re paying interest at a higher rate than your mortgage, so you’re also not benefiting.
We’ve accumulated quite a bit of Air Miles and Aeroplan points over the past couple of years, since we typically use our credit cards for big purchases and we made a lot of purchases for our small business on the cards as well. While we probably won’t be doing as many big purchases in the future, we do pay a lot of monthly bills using automatic credit card payments (eg. for telephones, cable, gym, etc.). Since we always pay off our balance each month, this is equivalent to cash purchases.
We signed up my wife for one and will transfer as many of our automatic payments over to the card as possible. When it comes to paying down a mortgage, every little bit helps.
Posted in Personal Finance | 
June 25th, 2007 at 6:10 am
That sounds like a terrible deal. At $1 for $125 that’s .8% with a $30 fee, but there are many other cashback cards out there that pay a lot better with no fees.
Personally, I use the no-fee Scotiabank Visa, which is .25% on the first 1500, .50% on the next 1500, and then 1% cash back on everything over 3000 for the year. I’ve been getting back ~ $250/year (I put my tuition on it) and I just dump this $250 on the mortgage.
June 25th, 2007 at 6:30 am
Investoid, wouldn’t you be better off getting a typical no fee 1% cash back instead of this 0.80% cash back + $30 annual fee?
You could use the 1% cash back and apply it to your mortgage.
June 25th, 2007 at 8:21 am
MDJ, Steve - Good points. A 1% cash back option would definitely be nice. However, the conditions on my mortgage preclude uneven payments made at irregular times.
I can pay 15% more per month and do ‘double up’ payments at any time. But I can’t simply repay any amount at any time, except through the credit card. This restriction resulted in a material reduction in the interest rate.
Since I am using the 15% top-up already, I see the credit card as a little bonus that would otherwise not be available.
June 26th, 2007 at 9:53 am
I agree with the other comments. I get 1% cashback on my visa, and 2% cashback on my amex (both are far better then this deal).
Worst case scenario, if you can’t apply this to your principle directly, throw it in an PC financial high interest savings account and apply it to the mortgage at renewal time. (or in your case, save it in the account until you have enough to double-up a mortgage payment then do so).
June 26th, 2007 at 9:53 am
also - I don’t pay annual fees for either of these cards (no fees at all).
June 26th, 2007 at 2:11 pm
Thanks for the comment Mr. Cheap, I’ll look into it. Can you please post application links to your cards?
June 27th, 2007 at 7:13 am
http://www10.americanexpress.com/sif/cda/page/0,1641,14151,00.asp is my Amex blue card (which I just checked my records after seeing that it only pays 1%, and it seems that’s right, although for some weird reason I actually got 0.87% for 2006, not the full 1%). Guess I was wrong about the 2% :-(.
http://www.tdcanadatrust.com/tdvisa/rewards/index.jsp?source=CBH is the 1% visa I mentioned (you get 0.5% for the first $3000 you spend and 1% after that I guess).
June 27th, 2007 at 7:14 am
The blue Amex doesn’t seem to be available any more either :-(, so I guess the TD Visa might be your best bet…
June 28th, 2007 at 2:14 pm
I have a Citibank Driver’s Edge Mastercard that earn me 2% towards the purchase of a new or used car of any make or model. Pretty good deal, no graduated levels. Points have to be used within 5 years of owning. I think this is the best deal out there, if you own a car, i guess.