Rocket Mortgage launches a credit card to help you save for or pay off a home

Saving up for a down payment and closing costs is a major hurdle on the path to homeownership. The new credit card from mortgage lender Rocket Companies aims to help homebuyers eliminate it.

The Rocket Visa Signature Card earns 5X points on everything you buy and allows cardholders to redeem rewards on closing costs and down payments with Rocket Mortgage, as well as homeowners who have mortgages serviced by Rocket Mortgage — to pay down their home loans.

CNBC Select breaks down the new card’s benefits, analyzes whether it’s a good fit for hopeful homebuyers and existing homeowners, and offers other cards that may be better suited for your situation.

The new credit card from Rocket comes with a rewards system that’s hard to decipher at first glance. While advertised as a cash-back card, the Rocket Visa Signature offers 5X Rocket Rewards points on all purchases and doesn’t consistently provide the value of 1 cent per point like most cash-back cards. Instead, the value of your rewards will depend on how you redeem them.

Here’s how that works:

• Your points are worth 1 cent each when redeeming towards down payment and closing costs with Rocket Mortgage (up to $8,000 in rewards) — so you’re essentially earning 5% cash back on all purchases if you use your points this way; or
• Your points are worth 0.4 cents each when redeeming towards Rocket Mortgage loan principal — in this case you’re effectively earning 2% cash back on all purchases if you use your points this way; or
• Your points are worth 0.25 cents each when redeeming towards a statement credit — meaning you’re earning 1.25% cash back on all purchases

Besides rewards, the new card from Rocket provides a few valuable Visa Signature benefits, which include:

• Extended warranty protection, which doubles your qualifying warranty coverage on items for up to one year when you make a purchase with the card
• Porch piracy protection, which offers coverage up to $10,000 for an eligible stolen item you bought with the card
• Cell phone protection, which provides coverage against theft and damages up to $750 ($50 deductible) when you pay your wireless bill with the card each month

Cardholders also get access to features that can help them manage their Rocket Visa Signature Card safely and responsibly, such as:

• Freeze Card and other digital security features
• Option to use the SmartPay, which allows you to automate and set rules for paying off your card balance
• Rocket Money, a budgeting and bill negotiation tool that can help you track your spending and credit score, automate savings and lower bills

The card does come with a price: carrying the Rocket Visa Signature will cost you a $95 annual fee. The fee, however, is waived for cardholders who have a mortgage loan serviced by Rocket Mortgage.

The Rocket Visa Signature Card is a unique product in more than one way. First, it targets homeowners and homebuyers specifically, allowing them to apply rewards to the costs associated with homeownership. Further, it offers an outstanding rewards rate — it’s rare to find a credit card product earning 5X points or 5% cash back on every purchase.

At the same time, neither of these features necessarily makes the card the best choice for future and existing homeowners.

If your goal is to buy a house, the idea of earning rewards toward a down payment may seem appealing. But the Rocket Visa Signature only lets you take advantage of the down payment redemption option if you’re getting a mortgage loan from Rocket Mortgage.

It’s not the best idea to commit to a lender so early in the process. When you’re ready to buy, you want to compare multiple offers. Different lenders may offer you different types of mortgage loans, loan limits and down payment assistance options. And perhaps most importantly, different interest rates.

Getting a lower interest rate, even just by 0.1% or 0.2%, could potentially save you tens of thousands of dollars over the course of a 30-year mortgage. Any value you receive from rewards points could be wiped away if you’re able to get a lower interest rate from another lender.

Note that the Rocket Visa Signature isn’t the only credit card that can help you save for a down payment. Consider the Bilt Mastercard® which earns 1X points on rent at qualifying properties (on up to $50,000 in rent payments every year), 3X points on dining, 2X points on travel and 1X points on everything else. You can redeem your rewards on travel, eligible fitness classes, art — or a down payment. Bilt allows you to get preapproved and compare rates across banks to choose the best offer. Even better, when redeemed for a down payment, points are worth 1.5 cents each. The card has no annual fee.

If you already have a mortgage with Rocket, the Rocket Visa Signature can help you pay down your mortgage balance. That could be helpful, but you can also find a 2% cash-back credit card that won’t lock you in a single redemption option. For example, the Wells Fargo Active Cash® Card earns 2% cash rewards on everything you buy. The Citi® Double Cash Card gets you 1% cash back when you make a purchase and another 1% when you pay it off.

The new Rocket Visa Signature Card can help you reach homeownership letting you redeem rewards for a down payment. However, deciding to commit to a lender early can be costly. While CNBC Select considers Rocket Mortgage one of the best mortgage lenders, there’s no guarantee you’ll receive the lowest rate with them. A home is one of the biggest purchases you can make so make sure you get the best deal — with or without rewards.

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