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Can You Pay Closing Costs with a Credit Card?
July 1, 2025
Quick Answer
While you typically cannot pay closing costs directly with a credit card, a few indirect avenues exist, each with its own set of financial implications.
Should You Pay Closing Costs With A Credit Card?
Using a credit card for closing costs has both advantages and disadvantages.
Potential Benefits
- Earning Rewards: A large transaction like closing costs can generate significant credit card rewards, such as points, miles, or cash back.
- Meeting Sign-Up Bonuses: The expense can help you meet the minimum spending requirement for a lucrative new cardmember bonus.
- Short-Term Flexibility: It provides a temporary solution if you are waiting for funds to become available right after closing.
Potential Drawbacks
- Limited Acceptance: Many title companies and lenders do not accept credit cards for closing cost payments.
- Processing Fees: You will likely have to pay a convenience fee, typically 2-3% of the total, which can add hundreds or thousands to your costs.
- High Interest Charges: If you carry a balance, the high annual percentage rate (APR) on the card will quickly accumulate interest.
- Cash Advance Classification: The transaction could be processed as a cash advance, which often involves higher fees and immediate interest accrual.
How to Pay Closing Costs With A Credit Card
Paying your closing costs with a credit card can be a savvy move for earning rewards or managing cash flow. Here’s how to approach this option wisely and effectively.
- Confirm Acceptance and Fees: Before anything else, verify that your title or escrow company accepts credit card payments. Inquire about any convenience fees, which are typically 2-3% of the transaction amount.
- Evaluate Your Credit Limit: Ensure your credit card has a high enough limit to cover the entire closing cost amount without maxing out the card, which could negatively impact your credit score.
- Choose the Right Card: Select a card that maximizes your benefit. This could mean one with a large sign-up bonus, a 0% introductory APR period, or high rewards rates. Use a discovery engine like the Kudos Explore Tool to find your best match.
- Calculate the Net Benefit: Weigh the value of the rewards or benefits against the convenience fee. If the fee costs more than the rewards you’ll earn, it may not be a worthwhile strategy.
- Create a Payoff Plan: If you don't pay the balance in full, high interest rates can quickly erase any rewards you gained. Have a clear, immediate plan to pay off the charge.
Impact On Your Credit Score
While paying your closing costs with a credit card might seem convenient, it's crucial to understand the potential effects on your credit score. Here are a few key factors to consider:
- Credit Utilization Ratio: A large charge for closing costs can significantly increase your credit utilization ratio. This key factor in credit scoring models could cause your score to drop noticeably.
- Increased Debt-to-Income Ratio: This new, high-interest debt can raise your debt-to-income ratio right before your mortgage closes. Lenders may view this increased risk unfavorably, potentially jeopardizing your loan approval.
- New Credit Inquiries: Opening a new card for this purpose results in a hard inquiry on your credit report. This can cause a temporary dip in your score at a critical time.
Alternative Ways To Pay Closing Costs
Seller Concessions
One common strategy is to negotiate for the seller to cover some or all of your closing costs. Known as seller concessions, this arrangement is written into the purchase agreement. While it reduces the cash you need at closing, the amount is often rolled into the home's sale price. This can be an effective tool, particularly in a buyer's market, allowing you to preserve your savings for other moving-related expenses.
Lender Credits
You can also explore lender credits. With this option, your mortgage lender covers a portion of your closing costs in exchange for a slightly higher interest rate on your loan. This lowers your immediate, out-of-pocket expenses but increases your monthly payment and the total interest paid over the life of the mortgage. It's a trade-off between paying less now and paying more over the long term.
Choose the Right Card to Pay Closing Costs
Paying for closing costs on a credit card can be a savvy financial move, but only if you have the right one. Whether you want to earn a substantial sign-up bonus, get cash back on a major expense, or leverage a 0% APR introductory offer, the goal is to find a card that fits your strategy. With nearly 3,000 cards to choose from, Kudos’ Explore Tool helps you find your credit card match by comparing features, fees, and rewards tailored to your needs.
To get more out of your credit cards, Kudos is the top free tool to use when you shop online. Plus, we are currently offering a $20 bonus after your first eligible purchase—just sign-up for free with code “GET20” and shop at a Boost merchant.
Frequently Asked Questions
What are the risks of paying closing costs with a credit card?
High interest rates can increase your total cost, and a large balance may negatively impact your credit score.
Are there benefits to using a credit card for closing costs?
You could earn significant rewards like points or cashback, and it offers a convenient short-term financing option if needed.
What fees are involved when using a credit card for closing costs?
Processors typically charge a convenience fee, usually 2-3% of the total transaction amount, adding to your overall expense.
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Editorial Disclosure: Opinions expressed here are those of Kudos alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
