TL;DR
Many Australian homeowners are exploring paying their mortgage with a credit card to earn rewards points and improve cash flow management. However, most Australian lenders don’t accept direct credit card payments, requiring third-party services that charge fees (typically 2-3%). When considering this strategy, compare these fees against potential rewards value (generally 0.5-1.5% in Australia). Also factor in the risks of high credit card interest rates (averaging 16-20% versus mortgage rates around 6-7%) and potential negative impacts on your credit score. Alternative options like mortgage offset accounts often provide better financial benefits for Australians. Always consult with your lender about their specific policies, and consider your personal financial situation carefully before proceeding.
Introduction
Using a credit card to pay your mortgage has gained attention among Australian homeowners seeking flexibility and rewards. While this approach can offer certain advantages, it’s important to understand the specific considerations in the Australian financial landscape. This comprehensive guide explores the ins and outs of using a credit card for mortgage payments in Australia, providing you with the information needed to make informed financial choices.
Understanding Australian Mortgage Payments
Before exploring credit card payments, it’s essential to understand the components of an Australian mortgage payment:
Principal: The portion of your payment that reduces the loan balance, helping you build equity in your home.
Interest: The cost of borrowing, calculated as a percentage of the remaining loan balance. In Australia, most mortgages are variable rate, with current rates typically ranging from 6% to 7% (as of April 2025).
Fees: Australian mortgages often include various fees such as service fees, annual package fees, or discharge fees.
Unlike in some other countries, Australian mortgages don’t typically bundle property taxes and insurance into regular payments. These are paid separately.
Traditional Payment Methods in Australia
Most Australian homeowners use these reliable methods for mortgage payments:
Direct Debit: The most common method, where payments are automatically withdrawn from your transaction account on scheduled dates.
BPAY: A uniquely Australian payment system that allows you to make payments via internet or phone banking.
Online Banking Transfers: Manual transfers through your bank’s online portal.
These methods are generally free of additional charges from Australian lenders, though your bank might charge for certain types of transactions.
Can You Pay Your Australian Mortgage with a Credit Card?
While technically possible, paying your mortgage with a credit card in Australia comes with specific considerations.
Major Australian Lender Policies
Based on current policies (as of April 2025):
- Commonwealth Bank: Does not accept direct credit card payments for mortgages.
- ANZ: Does not allow direct credit card payments for home loans.
- Westpac: No direct credit card option for mortgage payments.
- NAB: Does not accept credit cards for direct mortgage payments.
- Macquarie Bank: No direct credit card payment option for mortgages.
Benefits for Australian Cardholders
Rewards Programs: Australian credit cards typically offer:
- Frequent flyer points (Qantas, Velocity) valued at approximately $0.01-$0.02 per point
- Cash back programs (usually 0.5-1.5% of spending)
- Shopping rewards (Flybuys, Everyday Rewards)
Example: With a rewards card offering 1 Qantas point per dollar spent, a $2,500 mortgage payment could earn 2,500 points (worth approximately $25-50 in travel value).
Cash Flow Management: Credit cards can provide a buffer of 30-55 days (depending on your statement cycle) before payment is due, which can help with temporary cash flow challenges.
Risks for Australian Mortgage Holders
Transaction Fees: Third-party services in Australia typically charge:
- Plastic: 2.1-2.4% fee
- RewardPay: 2.1-2.9% fee (for American Express)
- B2Bpay: 1.2-2.7% fee (varies by card type)
Example: On a $2,500 mortgage payment with a 2.4% fee, you’ll pay $60 in fees, likely exceeding the value of rewards earned.
High Interest Rates: Australian credit cards average 16-20% interest, significantly higher than mortgage rates (currently around 6-7%). Carrying a balance can quickly negate any benefits.
Credit Score Impact: Using a large portion of your credit limit can affect your credit utilization ratio, potentially impacting your credit score. This is particularly relevant if you’re planning to refinance or apply for additional credit in the near future.
Australian Third-Party Payment Services
Since most Australian lenders don’t accept direct credit card payments for mortgages, third-party services are the primary option. Here’s how the major Australian providers compare:
Plastic
- Fees: 2.1% (standard), 2.4% (American Express)
- Process: Links your credit card to make payments
- Settlement time: 1-2 business days
- Maximum transaction: $50,000
RewardPay
- Fees: 2.1-2.9% (higher for American Express)
- Focus: Business payments but can be used for personal
- Requirements: May need ABN for registration
- Settlement time: 1-3 business days
B2Bpay
- Fees: 1.2-2.7% (dependent on card type)
- Features: Allows BPAY payments using credit card
- Settlement time: 2-3 business days
- Rewards: Additional Qantas Business Rewards points
CIMET Pay
- Fees: 1.5-2.4% (varies by card)
- Focus: Utility bills and mortgages
- Settlement time: 2-3 business days
Mortgage Offset Accounts: A Better Alternative?
A popular alternative in Australia is using a mortgage offset account, which may provide better financial benefits than credit card payments:
How It Works: An offset account is a transaction account linked to your mortgage. The balance in this account offsets your loan amount when calculating interest.
Financial Benefit: If you have $20,000 in an offset account against a $500,000 mortgage, you’ll only pay interest on $480,000.
Effective Return: The interest saved equals your mortgage rate (e.g., 6.5%), which typically exceeds credit card rewards returns (0.5-1.5% after fees).
Tax Advantages: Unlike interest earned in savings accounts, the benefit from an offset account isn’t considered taxable income.
Flexibility: You retain access to your funds while reducing interest payments.
Making Smart Decisions: The Australian Context
Before deciding to pay your mortgage with a credit card, take these Australia-specific steps:
Calculate Your Specific Return:
For a $2,500 monthly mortgage payment:
- Fee cost at 2.4%: $60
- Rewards value at 1 Qantas point per dollar (approximately 1% return): $25
- Net loss: $35 per payment
Consider Your Credit Card Statement Cycle:
Australian credit cards typically offer between 30-55 days interest-free, depending on when in your statement cycle you make a purchase. Time your mortgage payment strategically to maximize this interest-free period.
Consult Your Financial Adviser:
Discuss potential impacts on your overall financial strategy, including tax implications and debt management.
Check with Your Lender:
Confirm if there are any specific terms in your mortgage contract that might prohibit or penalize third-party payment processing.
Case Study: Australian Homeowner Experience
Sarah from Melbourne: “I tried using my Qantas Premier Platinum card to pay my $2,700 monthly mortgage through Plastic. While I earned 2,700 Qantas points each month, the 2.4% fee ($64.80) exceeded the value of these points (approximately $27-54). After three months, I switched to using an offset account instead and found I was saving much more in interest than I was earning in points.”
Australian Consumer Protection Considerations
When using third-party services for mortgage payments, be aware of these consumer protection aspects:
Payment Timing: Third-party services may take 1-3 business days to process payments, which could result in late payment to your lender if not properly timed.
Consumer Guarantees: Services like PayPal offer buyer protection, but this typically doesn’t extend to mortgage payments processed through third parties.
Record Keeping: Maintain detailed records of all payments made through third-party services for tax purposes and dispute resolution.
ASIC Regulations: Third-party payment processors must comply with Australian financial services regulations, but they don’t offer the same protections as direct bank transfers.
Tax Implications for Australian Residents
Using a credit card for mortgage payments can have tax implications:
Investment Properties: If using a credit card for an investment property mortgage, the card fees may be tax-deductible, but consult with a tax professional to confirm.
Primary Residence: For your home mortgage, credit card fees for payment processing are generally not tax-deductible.
Business Use: If a portion of your home is used for business, a proportional amount of fees might be deductible.
Conclusion
For most Australian homeowners, paying a mortgage with a credit card usually doesn’t make financial sense due to the gap between processing fees (2-3%) and rewards returns (typically 0.5-1.5%). Alternative strategies like mortgage offset accounts generally provide better financial benefits in the Australian context.
However, in specific scenarios—such as when meeting a significant sign-up bonus requirement or during a very short-term cash flow issue—it might be temporarily advantageous. Always calculate the exact costs versus benefits for your specific situation, and consider consulting with a financial adviser before proceeding.
Frequently Asked Questions
Can I pay my Australian mortgage directly with a credit card?
Most major Australian lenders (Commonwealth Bank, ANZ, Westpac, NAB, Macquarie) do not accept direct credit card payments for mortgages. You’ll typically need to use a third-party service.
Which third-party services allow Australians to pay mortgages with credit cards?
Popular options include Plastic, RewardPay, B2Bpay, and CIMET Pay, with fees ranging from 1.2% to 2.9% depending on the service and credit card type.
Are the fees for using these services tax-deductible in Australia?
For investment properties, these fees may be tax-deductible as part of your investment expenses. For your primary residence, they generally aren’t deductible. Always consult a tax professional for advice specific to your situation.
How do mortgage offset accounts compare to using credit cards for payments?
Offset accounts typically provide better financial benefits for Australians, as they save interest at your mortgage rate (around 6-7%) compared to credit card rewards returns of approximately 0.5-1.5% after fees.
Will using a credit card for mortgage payments affect my credit score in Australia?
Yes, it can impact your credit utilization ratio, potentially affecting your credit score, especially if you’re using a large portion of your available credit limit.
Can I use BPAY with my credit card to pay my mortgage?
Standard BPAY doesn’t accept credit cards directly. However, services like B2Bpay allow you to make BPAY payments using your credit card for a fee.
Do any Australian lenders offer bonus points for mortgage payments?
Some lenders offer package deals that include credit cards with bonus points, but these are separate from the mortgage payment itself and typically don’t award points for the mortgage payment directly.
How long do third-party services take to process mortgage payments in Australia?
Most services take 1-3 business days to process payments, so you’ll need to initiate payment earlier than your due date to avoid late payments.
Are there any regulations protecting consumers using third-party payment services?
These services must comply with Australian financial services regulations, but they don’t offer the same protections as direct bank payments. Always research the service’s reputation and keep detailed records.
Can I use this strategy for investment property mortgages?
Yes, and the fees might be tax-deductible as an investment expense, potentially making the calculation more favorable than for owner-occupied properties.
Resources
Government & Regulatory
- ASIC MoneySmart – Financial guidance from the Australian Securities and Investments Commission
- Australian Financial Complaints Authority – For payment disputes
Comparison Services
- Canstar – Compare credit cards and mortgages
- Finder – Credit card rewards calculators and comparisons
Financial Advice
- Financial Planning Association of Australia – Find an accredited financial planner
- Australian Taxation Office – Tax guidance for investment properties
