A credit card to pay down the mortgage

Your Money

August 01, 2004|By Lorene Yue

For years, there have been credit-card reward programs to help you buy plane tickets, save for your child's college tuition or get free movie rentals.

Now, putting your groceries on plastic can help finance a home.

Credit-card companies are tying their reward programs to mortgage loans: Some companies will give you a break on closing costs. Others help you pay down the principal.

Of course, running up debt to pay off other debt doesn't make sense, so only take on one of these cards if you are disciplined enough pay down balances every month.

Refrain from signing up for every reward program just because the perks sound good, and shop around for the best terms and conditions. You don't want high interest rates and penalty fees to eat away at any potential rebate.

Merrill Lynch & Co. Inc. is offering its clients a chance to earn a $250 or $500 closing-cost credit on a Merrill Lynch mortgage.

CitiCards, which offers incentives tied to new cars, college savings and tickets for entertainment, launched the Home Rebate MasterCard this year.

Citigroup's program offers a 1 percent rebate on every dollar charged. That rebate can be applied toward the cardholders' mortgage principal, which doesn't have to be with Citigroup. There's no cap to the annual rebate amount.

If you put $1,500 on your card each month, the rebate program would shave $180 a year off the principal.

Not a homeowner but in the market? You don't need to have a mortgage to get the card. The rebate is given on the anniversary date of when you open your account, so you have a year to link the account to a mortgage lender. If you don't have a home loan after a year, the 1 percent rebate is credited to your bill.

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