American Express has recently partnered with American Home Mortgage to allow mortgage holders to pay their mortgage by Credit Card.  Most mortgage companies do not allow this for very good reasons. 1) The transaction charge which are usually between 1-3% that credit card companies apply takes a significant bite out profits 2) making it easier for mortgage holders to incur even more debt is a risky proposition.

For many people who play the credit card rewards game being able to pay the mortgage by credit card has always been the holy grail of reward points.  I’ve personally always wanted to this, and will definitely look into the offer if my lender ever becomes a partner in the program.  The one caveat is that enrolling in the program costs $395 which would take a big cut out of any potential profits in the first year.  For example, Amex Blue Cash pays back .5% for the first 6500, and 1.5% for every dollar thereafter.  Assuming a flow-through of 25,000 which I would think would be pretty typical for someone paying his or her mortgage that’s $310 in profit.   In the 1st year the enrollment fee takes everything and then some.

According to American Express, they will carefully screen potential applicants to make sure they are suitable for the program.  They don’t want to be saddled by deadbeats who want to avoid defaulting on their mortgage by defaulting on their credit card.  At the same time AHM ideally wants to transfer this type of risk to American Express, so I’m curious how they’ve decided the terms.  Given that AHM is likely to take a hit on the transaction charge, it’s unclear what incentive they have other than guaranteeing payment on borrowers who would otherwise might miss payments? For AHM it looks like a good marketing move, but little else.  Given that American Express is planning on partnering with other lenders, it remains to be seen how effective this marketing will be in the long run.  Full disclosure: I own shares of AHM in my IRA Accounts.

Given the high enrollment fee, the profits from the transaction charges, and the ability to screen risk, American Express should make out pretty well in this.  And really the enrollment fee is the kicker given that with every new mortgage you would have to enroll again.  It’s my opinion that people always underestimate how often they move and/or refinance. However if you’re smart consumer who really understands your mortgage, this could be a great opportunity to earn some mondo rewards.