More and more people are turning to their credit cards as a way to help them make ends meet, by using them to make payments on their mortgage. According to Shelter, over a million households last year did just this when faced with a choice between borrowing on credit or defaulting on payment altogether.
However, the reality of spending on your credit card to keep up your mortgage payments is that you're likely to enter into a debt spiral that's hard to climb out of - and could even result in you losing your home. Here's what you need to know.
Why might I consider using my credit card to pay my mortgage?
If the statistics from Shelter are anything to go by, the fact that so many Brits are using credit cards for mortgage payments can only be down to one thing - many of us simply don't have enough funds to keep up mortgage payments each month, which can often make up the largest chunk of our essential expenses.
In a situation where you are faced with telling your mortgage lender you can no longer meet payments and as a result are at risk of the dreaded 'R' word, it's easy to see why so many of us would prefer to tide ourselves over using our credit card.
Besides, we'd resolve to clear the credit card as soon as we can and at least we'd have that valuable breathing space till next month's mortgage payment is due.
So what's wrong with using my credit card?
While credit cards do have certain undeniable benefits when used in the right way, they are still an expensive way to borrow, and as such using them to pay your mortgage is an unwise option. Making what is likely to be a larger-than-average payment on your credit card will attract woeful amounts of interest if you can't clear it right away, making it increasingly difficult to pay off.
Once you've met one mortgage payment using your credit card, it's tempting to do it again the next month, especially if you're still suffering from a lack of cash. But doing so will quickly send you down the slippery slope of the kind of credit card debt that's insurmountable, as more and more interest is added to your outstanding balance.
In most circumstances using your credit card to solve a cash flow problem isn't a good idea because it will only exacerbate your payment difficulties rather than presenting a workable solution; instead you should try to tackle the problem you are having paying your mortgage head-on.
What should I do instead?
If you're struggling to meet your mortgage payments there is help available. The first thing you should do is contact your lender and discuss your situation, as they are likely to be able to offer you a solution such as temporarily switching from a repayment mortgage to an interest-only mortgage, or arranging a mortgage holiday.
It's also a good idea to pay as much of your mortgage payment as you can to your lender to show you are at least making an effort to keep up payments - your lender will be more willing then to offer a solution. It's worth remembering too that no mortgage lender wants to repossess your home - this is nearly always a last resort for both parties when no other solution can be found.
Paying a visit to your nearest Citizens Advice Bureau is also a wise move if you are struggling with your mortgage. They will be able to offer you free, non-profit advice and practical help. Shelter can also offer useful advice.
Is using my credit card to pay my mortgage ever an option I can consider?
If your cash flow problem really is only temporary and you know you'll have available funds when your credit card bill is due, it is possible to meet mortgage payments with your credit card, though still not advisable.
If you do end up using your credit card to pay your mortgage just make sure you can clear your balance in full as soon as your bill is due to avoid racking up mountains of interest on your borrowing.