Earnest money serves as a good faith deposit made by a buyer to a seller during a real estate transaction, indicating the buyer’s serious intention to purchase the property. It is typically a percentage of the purchase price and held in escrow until closing. The question of whether credit cards can be used for this deposit arises due to transaction size and the intended purpose of the funds.
The significance of earnest money lies in its protection of the seller. Should the buyer default on the purchase agreement without a valid contingency, the seller may be entitled to keep the earnest money as compensation. Historically, payment methods were limited to cashier’s checks or personal checks, offering a verifiable and secure transfer. However, evolving payment technologies have led to considerations of alternative methods, including credit cards.
