This Credit Card Lets You Pay Your Mortgage With Rewards -- but Read the Fine Print First

Most people are familiar with travel rewards and cash back credit cards; that is, cards that earn more for travel and everyday purchases. But a new rewards credit card from Rocket Mortgage® is taking credit cards to a place it has never gone before -- mortgages.

The Rocket Visa Signature® Card is a cash back credit card designed to help you save for a down payment or pay off your mortgage. While that sounds good in theory, the card also has several limitations that might make it less advantageous for home buyers who don't want a home loan from Rocket Mortgage®.

How the Rocket Visa Signature® Card works

The Rocket Visa Signature® Card earns 5 Rocket Rewards points for every dollar you spend. The value of those points depends on how you choose to redeem them, but you can get between 1.25% to 5% back on everyday purchases. Redemption options include:

• Down payment and closing costs: Rocket points are worth $0.01 when used to pay closing costs or as a down payment on a new home (up to $8,000). When used in this way, your Rocket Visa earns 5% back on every purchase.
• Rocket mortgage: You'll get $0.004 for every point when you use Rocket points to pay down your Rocket Mortgage® loan balance. When used for your Rocket mortgage, your credit card earns 2% back.
• Statement credits. Your Rocket points are worth $0.0025 when you redeem them as a statement credit. This gives your Rocket Visa an earn rate of 1.25% when used in this way.

For example, let's say you spend $7,500 on your Rocket Visa. You would earn 37,500 Rocket points. These points would equal $375 when applied toward your down payment or closing costs, $150 when used toward your Rocket mortgage, or $93.75 when redeemed as a statement credit.

But wait -- there's an annual fee

Perhaps the biggest disappointment with the Rocket Visa Signature® Card is that you'll pay a $95 annual fee, unless you have a mortgage with Rocket Mortgage®. So, if you want to use this card to save for a down payment or cover closing costs on your first home, you'll pay Rocket $95 annually.

Assuming that you use your Rocket points for a down payment or closing costs, you would have to spend $1,900 to earn $95 in rewards. You'd also have to spend roughly $3,166 before this card becomes more profitable than a no annual fee credit card with a 2% earn rate. At $3,166, the no annual fee card would have earned $63.32 on 2% back; the Rocket Visa Signature® Card would earn $153.30 minus the $95 annual fee, or $63.30.

Most American households spend more than $3,166, so this card is likely more profitable than most no annual fee cards. But here's another catch: In order for your Rocket points to have the most value, you need to get a mortgage with Rocket. That's right: If you pick another lender, your Rocket points will be worth $0.0025, not $0.01.

That limitation can make this card risky for home buyers. The card might force you to choose Rocket Mortgage® as your lender, even if you could get a lower interest rate from another.

Is the Rocket Visa Signature® Card worth it?

The Rocket Visa Signature® Card is worth it if you're going to choose Rocket Mortgage® for your home loan, and you plan to use your Rocket points to cover closing costs or your down payment. It might also be worth it if you already have a loan with Rocket Mortgage® and want to use credit card points toward your loan balance.

The card has a $200 welcome bonus (earned after you spend $3,000 in the first 90 days), which can offset the $95 annual fee for at least two years. That said, if you're not interested in getting a home loan with Rocket Mortgage®, not even a welcome bonus will make this card worth the eventual cost.

Before you apply, you might want to consider no annual fee cash back cards that earn 5% back on rotating quarterly categories, like Chase Freedom Flex℠. Even though these cards aren't designed with mortgages in mind, you can deposit earnings into a high-yield savings account and save them for when you eventually buy a home.