Some new development condos in NYC took credit cards for down payments... I guess this is the next step
By LINGLING WEI
The Wall St. Journal
American Express Co. plans to announce today what is believed to be the first program designed to allow consumers to put their monthly mortgage payments on plastic -- and to earn credit-card rewards for doing so.
Mortgage bills, often the single largest payment people make every month, have been off limits to cardholders to collect points, largely because home lenders find it costly to pay card companies for processing the transactions. American Home Mortgage Investment Corp. and IndyMac Bancorp Inc., both among the nation's top 10 residential-mortgage originators, are the first two lenders to sign up for the program, with the idea of appealing to American Express's affluent clientele.
For American Express, the move represents its continuing efforts to drive credit-card acceptance in areas where cash or checks remain the dominant form of payment. The New York financial-services and travel company has teamed with various developers and property-management companies to enable customers to make down payments for luxury condominiums or pay rent on their American Express cards.
The mortgage-payment program is "just another progression for us in the real-estate area and in the luxury space," said Bill Glenn, who oversees American Express's relationships with its merchant customers in the U.S. and its global merchant network group.
To enroll in the program, American Express said its cardholders will have to pay a one-time fee of $395 to the mortgage lender to cover services such as account management and various perks. Once enrolled, cardholders will earn cash back, airline or hotel points, or other types of rewards their American Express cards offer.
A cardholder with a $2,500 monthly mortgage payment would amass 30,000 card points a year. For a holder of the American Express "Blue Cash" card, that same mortgage payment would recoup $385 back in the first year. The Blue Cash card pays 0.5% for the first $6,500 charged and then 1.5% for every dollar after that.
Consumers shouldn't pick a mortgage because of the opportunity to earn card points. "If you are not paying off your bill in full every month, you probably would be paying a 15% to 18% interest on a mortgage that has a rate of only 6% to 7%," said Curtis Arnold, founder of CardRatings.com, a credit-card-information Web site. "These rewards programs can be very addictive."
The American Express program is designed for credit-worthy borrowers seeking mortgages for home purchases or refinancing their prime loans with the lenders who partner with American Express. The focus by American Home Mortgage and IndyMac on prime loans "really fit with our card-member base," Mr. Glenn said, adding that "over time, we'll see more lenders" join the program as a way to differentiate themselves. He declined to specify other mortgage lenders under consideration.
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