Mortgage clinic: 'Cards are tempting but you could pay more'

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The Independent Online

'I've seen reports in the press recently that people are using their credit cards to pay their mortgages. It sounds risky, but I have a couple of credit cards offering interest-free periods of six months. Could I use them to take a payment holiday of some sort? That would be attractive given that I am paying 6.75 per cent on my mortgage right now.'

lb, by e-mail

A poll carried out recently by the housing charity Shelter found that 6 per cent of households paid either their mortgage or rent using a credit card.

It's hard to say how many of those households do this on a regular basis, or as a one-off to meet a cash-flow crisis. It's even more difficult to say whether any homeowners are using credit cards' interest-free periods as a short-term way around high interest rates.

"To measure whether people are using their credit cards to pay their mortgage is almost impossible," says Katie Tucker of brokers John Charcol. "Anyone with a mortgage who is using a credit card at all, even for their weekly shopping, could be subsidising their income using credit."

It is possible to use a credit card to pay the mortgage. The simplest way is to write a credit card cheque, but be warned: on most accounts, credit card cheques attract interest from the day they are cashed. And most cards charge far higher rates of interest than mortgages.

A way round this, according to Rob Kenley, head of credit cards at Moneysupermarket.com, is to call the mortgage company and make a card payment over the phone. The card company will not then treat the payment as an expensive cash advance.

"The Halifax Purchase card offers interest-free credit for 15 months on purchases, so in theory you could use the card to reduce your mortgage over this time frame," he says. "But make sure you repay the balance in full as soon as the interest-free period expires."

And that's where the real risk lies. It might be tempting to use credit cards to ease a short-term cash crisis, or to take advantage of an attractive, low-cost credit offer at a time when mortgage rates are high. But even low-cost credit card deals become expensive once the promotional period expires, and you could end up paying far more than your usual mortgage arrangement. "Only as a last-ditch emergency option should credit cards be used to make a mortgage payment," says Tucker.

There are safer ways to cut your mortgage bills, such as switching to a lender with a lower rate.

If you are struggling to meet payments, contact the lender rather than building up card debts that could spiral out of control.

Send us your questions and you could receive £50 to spend at Amazon

Foxed by jargon? Confused by all the options? E-mail a question to mortgageclinic@independent.co.uk. We will not reveal your identity, and we cannot give specific advice. If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. www.amazon.co.uk/homeandgarden

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