Credit cards cannot be used to pay off federal student loans; however, you might be able to use credit to pay off private student loans. There are advantages and disadvantages to paying off your student loan debt with a credit card.
You can pause interest on your transferred student loan balance during the introductory window by looking for credit cards with introductory APR offers, even though most credit card interest rates will be higher than student loan interest rates.
You may find that using a credit card to pay off your student loans makes sense for you, but it’s crucial to gather all the information before deciding on the best course of action.
/183762453-F-56a1903f3df78cf7726c0b11.jpg)
How we make money
You have money questions. Bankrate has answers. For more than 40 years, our professionals have assisted you in managing your finances. We always work to give customers the professional guidance and resources they need to be successful on their financial journey.
Because Bankrate adheres to strict editorial standards, you can rely on our content to be truthful and accurate. Our team of distinguished editors and reporters produces truthful and precise content to assist you in making wise financial decisions. Our editorial team produces factual, unbiased content that is unaffected by our sponsors.
By outlining our revenue streams, we are open and honest about how we are able to provide you with high-quality material, affordable prices, and practical tools.
Bankrate. com is an independent, advertising-supported publisher and comparison service. We receive payment when you click on specific links that we post on our website or when sponsored goods and services are displayed on it. Therefore, this compensation may affect the placement, order, and style of products within listing categories, with the exception of our mortgage, home equity, and other home lending products, where legal prohibitions apply. The way and location of products on this website can also be affected by other variables, like our own unique website policies and whether or not they are available in your area or within your own credit score range. Although we make an effort to present a variety of offers, Bankrate does not contain details about all financial or credit products or services.
The fact that credit cards often reward large purchases is hardly new information. There are cards designed for rewarding travel, business purposes, and even automobiles. Can credit cards, however, assist with one of the most annoying costs of early adulthood?
According to student loan data, nearly 60 percent of U. S. Adults’ student loan debt has caused them to postpone making a significant financial decision. Even though there has been some respite recently, student loan interest will start up again on September 1 and payments are due starting in October. It is feasible to use a credit card to pay off student loans, but only in certain circumstances is it a wise decision.
Consider the risks of using a credit card to pay off student loans before making this decision. These risks include losing federal protections and adding a higher interest rate to your debt. These steps will help you decide whether the advantages outweigh the risks.
First: Determine whether you can make loan payments directly with a credit card
The majority of loan servicers demand bank account payments, which makes using a credit card for payment challenging. Access your payment choices by logging into your student loan account. Start the payment process and see if using a credit card to pay is an option. If not, consider the following:
Strategy 1: A third-party service
Despite their negative reputation, middlemen can really be advantageous in this situation. When you use a third-party website to pay for your student loans, you can charge your credit or debit card and pay the recipient using their preferred method (check, bank transfer, or wire transfer). In this manner, you can settle big expenses that typically don’t take credit cards. This approach not only helps you manage your money better, but it also enables you to get rewards on expenses for which you wouldn’t otherwise be qualified.
Cons: These services often charge fees for each payment, even though users can earn rewards. That may surpass any benefits you receive from the purchase. Additionally, you should be aware of the various processing times for the payment methods that your loan provider accepts and make plans appropriately.
Best card for this method: The Chase Sapphire Preferred® Card. Even though this card only earns a little percentage on general purchases, paying off your debt with it can help you get a sizable welcome bonus. This might become a credit on your statement that you can use to settle your debt. Additionally, you can completely avoid transaction fees by using Chase’s bank-to-bank transfer option.
Strategy 2: Convenience checks
Consider a convenience check if you’d rather take a more direct approach and avoid paying third-party websites. It can be made out directly to the recipient and lets you use the entire amount on your credit card, just like a personal check. It can be used anywhere regular checks are accepted, and it’s a useful workaround for the majority of student loan services’ credit card prohibition. Because it doesn’t need to go through another service, it might also process more quickly.
Drawbacks: Proceed with extreme caution. Convenience checks automatically accrue interest at a rate of up to 29 percent, which is the same as that of cash advances. Only if you have the money on hand to pay back the charge right away and are just looking to get rewards should you employ this tactic.
The American Express Blue Cash Everyday® Card is the best card for this method. Among all credit card issuers, American Express offers the best customer service, so if you experience any issues with your convenience checks (obtaining, using, processing, etc.), ), the experience should be painless. Despite the fact that this card offers a 15-month introductory 0% APR on balance transfers and purchases for the first 19 24 percent to 29. Convenience checks are not eligible for this offer (after 99 percent variable APR).
Credit card payoff strategies
After you understand how to use a credit card to pay off student loans, you should think about your payback plan. Are you going to continue making small, fixed payments each month, or are you going to charge a sizable portion of your loan balance to a credit card?
For a large charge, take advantage of a 0% intro APR offer
Many cards provide new users with an introductory APR of 0%, so you won’t have to worry about paying interest for a set period of time. The majority of offers expire after 12 to 18 months, but some extend to 21 months. This is the option for you if you don’t have enough money in your bank account to pay off a charge right away.
Cons: Credit card APRs are typically higher than student loan APRs, even though the majority of intro APR cards have interest rates that are comparable to the national average. Make sure you can repay your loan in full before the introductory 0% APR period expires.
Best card for this method: The Chase Freedom Unlimited®*. For 15 months, both purchases and balance transfers are subject to the introductory 0 percent APR; this is followed by a 20 49 percent to 29. 24 percent variable APR. The additional feature that elevates this card is its welcome offer, which is as follows: Spend $500 on purchases within the first three months of opening an account to receive a $200 bonus.
For small, recurring charges, use a flat-rate card
If you intend to gradually reduce your credit card balance through use, a flat-rate cash back card might be your best option. Since student loans don’t fall under the usual bonus categories, most rewards cards would only give 1 percent cash back on payments, but flat-rate cards will give 1 5 to 2 percent. Some even include a welcome offer that can be applied to your balance as a statement credit.
Cons: This option is best suited for people who want to receive rewards while making fixed payments over an extended period of time. Seeking a 0 percent introductory APR offer is preferable if your goal is to transfer your whole loan balance from your loan account to a credit card account.
Best card for this method: The Citi Double Cash® Card. Up to two percent cash back is available with this card on all purchases, with one percent awarded at the time of purchase and another one percent after payment. This setup can incentivize you to pay your balance.
Playing the calendar game
Everything revolves around timing, which you can take advantage of. The majority of cards allow you to modify the due date, with many having the 28th of the month as the default. Make the most of this by spacing out the due dates on your credit card and loans by at least two weeks. By doing this, you give yourself a safety net. In the event of an unforeseen expense, you have time to adjust your budget. Additionally, this can pay you in between deadlines, allowing you greater financial flexibility.
This approach might not be the greatest if you frequently mix up dates or lose things. It might be preferable to move your due dates closer together if the window is too wide. But, you ought to give yourself a few days’ notice in order to account for site outages, processing delays, vacations, etc. Your first late payment is waived with Discover it® Cash Back (up to $41), which can be helpful while you’re trying to work out your payment plan.
There is no hard and fast rule when it comes to loan repayment strategies; you are free to combine different approaches as long as the overall objective is met. Assess your present spending patterns to ascertain the most effective debt repayment strategy for you. If you’ve been using a flat-rate card for a while and it’s not rewarding you enough, consider switching to a card with a 0% intro APR. Tired of third-party site fees? Go for convenience checks. You are ultimately responsible for repaying the student loans, so choose the option that best suits your needs.
Finding a payment plan that works for you is crucial, but you shouldn’t complicate your repayment plan or open too many credit cards quickly. To avoid a hard inquiry on your credit card, make sure to look for preapproved cards. You should also wait six months to a year before opening another card. Additionally, resist letting hearsay or curiosity overcome you. If you come upon a plan that fits both your spending and your schedule, follow it through. Do your homework before making a switch if you wish to.
It is essential to note that using a credit card to pay off student loan debt is a high-risk, high-reward strategy. There are a few potential advantages, but also significant drawbacks. If you do determine that using a credit card to pay off your debts is worthwhile, devise a stress-free payment plan that suits your needs. Remember that you have additional options to consider in order to assist with paying off your debt.
*Bankrate has gathered information about the Chase Freedom Unlimited® on its own. com. The card issuer has not examined or approved the card details.
FAQ
Can student loans be paid with a credit card?
Federal student loans cannot be paid off with a credit card, but private student loans may be paid off with credit.
Can I make a loan payment with a credit card?
You might be able to use a credit card to pay off a portion of the whole balance on your house, auto, or student loans if your lender permits it and you are granted a high enough credit limit. However, the Department of Treasury forbids federal student loan issuers from taking credit card payments.
Can you use Amex to pay student loans?
Can American Express be used to pay student loans? No, balances from student loans cannot be transferred to American Express credit cards. Nonetheless, if a third-party payment processor accepts Amex credit cards, you might be able to use them to pay off student loans.
Do student loans go away after 7 years?
If the loan is fully repaid, there will still be a default for seven years after the last payment date on your credit report, but there will be no balance shown. Your credit report will no longer show the default if you successfully rehabilitate your loan.
Read More :
https://www.bankrate.com/finance/credit-cards/how-to-pay-off-student-loans-with-a-credit-card/
https://www.chase.com/personal/credit-cards/education/basics/can-you-pay-off-student-loans-with-credit-card