Downpayment on a Credit Card?
Even after the mortgage meltdown, it’s still possible to buy a house in the United States with a downpayment as low as 3.5% of the purchase price. For example, if it’s a $250,000 home, that equals out to be $8,750. Being that it’s a relatively small amount, does that mean you should put it on your credit card? That’s probably a bad idea. Here’s why…
First of all, 3.5% is an extremely low down payment. To be honest, if all you can afford is 3.5%, then it’s probably not time for you to buy a house yet. In fact, these low and no down payment mortgages are a key contributor of the financial crisis. So putting only 3.5% down is already a riskier proposition. If you then have to charge that amount to your credit card, it’s essentially the same as putting 0% down.
There is one exception that that rule according to Kara, a financial writer for CreditCardForum.com. “The only circumstance I would ever support someone doing that is if they were charging it to their credit card only to get reward points. For example, I know someone that charged their down payment to their Amazon credit card. Then when they got the bill that month, they paid the amount back in full.” So only under those circumstances would it ever make sense.
Furthermore, it should be noted that reward cards, like the Amazon credit card mentioned above, carry above average interest rates. So carrying any type of balance on them would be foolish.