It is possible to pay student loans with a credit card but you will need to utilize a third-party service to make the transaction. In addition, this process can be both risky and costly as you will pay off additional fees and high interest. However, if you facing challenges to meet up your loans, review options to lower or temporarily stop payments.
Additionally, if you can pay off your loans entirely and intend to earn credit card rewards, it’s advisable to first assess the associated fees. Moreover, utilizing a workaround to use a credit card for payments may not be reasonable. Before resorting to your credit card for this purpose, it’s crucial to fully comprehend the associated expenses and drawbacks.
Advantages To Pay Student Loans With a Credit Card
The advantages of paying your student loans with a credit card can differ depending on individual circumstances, but here are the primary benefits to consider:
Earn Rewards On Your Spending
Paying your student loans and other bills with a rewards-earning credit card provides an opportunity to accumulate points and miles on those transactions. However, it’s important to note that any fees paid will get the rewards earned.
Buy Time Before Payment Is Due
Using a credit card for payments can provide some additional time before you’re required to make a payment, which can be beneficial during periods of financial strain.
Secure a 0% APR For A Limited Time
If you utilize an introductory 0% APR offer, paying a qualified student loan with a credit card could save you money on interest. By using the card to pay off your student loan and clearing the balance within the introductory APR period, you may realize some savings.
Disadvantages To Pay Student Loans with a Credit Card
Depending on credit for day-to-day expenses can offer certain benefits, but it also carries risks. For instance, using a credit card to pay off student loans may present several disadvantages. Here are some important factors to note:
Losing Money To Fees
Many companies that issue credit cards don’t allow direct payment of student loans using credit cards. This means you will need to find alternative methods if you want to use your credit card for this purpose. Moreover, this involves using a third-party service to pay the transaction. However, be aware that these third-party services usually charge fees which can increase the total amount you owe, canceling any advantages from not paying directly.
Considerable Debt
If you depend too much on credit cards, it can lead to accumulating debt that becomes challenging to manage. With the average APR on credit cards being relatively high, there’s a risk of entering a cycle of debt that may be hard to break free from.
Potential Damage To Your Credit Score
Your credit utilization ratio helps in determining your FICO credit score, accounting for 30 percent of it. The accumulating debt on revolving accounts such as credit cards can cause this ratio to rise rapidly. However, if your credit utilization rate increases, there’s a possibility that your credit score could decrease as a result.
Credit Card Payment Alternatives For Student Loans
Many loan providers need cash payments, directly withdrawn from your bank account. However, if you prefer to pay with a credit card, you can log into your account and navigate to your payment options to check if it’s available.
Furthermore, it’s advisable to review with your lender and note that even if credit card payment is permitted, you will cover convenience fees. If you are unable to use a credit card for making direct student loan payments, you have several alternatives:
Use a Third-Party Provider
Certain payment services offer the option to make loan payments on your behalf using a credit card but anticipate a fee. They typically charge a 2.9% fee for using a credit card to pay your student loans.
Pay With a Convenience Check
Credit card issuers may provide convenience checks that allow you to access your credit line and pay bills, including student loans. However, using a convenience check is used as a cash advance on your credit card. Moreover, you will cover a cash advance fee usually ranging from 3% to 5% of the check amount. Additionally, the check begins accruing interest immediately at a cash advance rate.
Make a Transfer
Certain credit card issuers may permit you to pay off loans using balance transfers. In addition, it’s essential to consult both the issuer and the lender. Be aware that you will be required to pay a balance transfer fee, typically ranging from 3% to 5% of the transferred amount.
How To Pay Student Loans With A Credit Card
Although making student loan payments directly with a credit card through your student loan servicer may be impossible, you can still accomplish this by taking a few additional steps.
Use a Third-party Provider
Using a third-party provider like Plastiq enables you to pay bills, including student loans, with a credit card. However, you will pay fees for each transaction. These additional charges will include the expense of your loan as not all credit card issuers offer this option for bill payments through third-party providers.
Transfer Student Loan Balance
Certain credit cards offer transferring student loan balances, which is advantageous if you are eligible for an introductory 0% APR balance transfer promotion. Additionally, you will have a duration of several months to repay the balance without paying interest charges. However, it’s important to have a good credit score to qualify and be aware that most balance transfers involve a fee, around 3% to 5% of the transferred amount.
Use Cash Advance
Your credit card issuer might offer a cash advance from your credit line, either through an ATM withdrawal or a paper check. Although you could use this cash to make a student loan payment, it’s important to consider the associated costs. However, cash advances cover high fees ranging from 3% to 5% of the transaction amount, along with interest rates that can exceed 29.99% or even higher.
Conclusion
You can directly pay student loans with a credit card by utilizing alternative methods such as third-party bill pay services or balance transfers can be both expensive and difficult.