Using an intermediary
Using an intermediary service is one option when paying a bill with a credit card when it can’t be done directly. These businesses bill your credit card and then send you a check to cover the balance. They tack on an extra charge to cover processing expenses and, naturally, to turn a profit.
The most prominent intermediary service is Plastiq, which charges 2. 9% for credit card payments.
Using an intermediary is at best a last resort. Heres why: Say you have a $500 loan payment due. An intermediary may charge your card $515.25 percent of the total amount due plus a 3% fee (20%)E2%80%94%), after which you should send a check to your lender for $500.
Your loan remains in good standing . but youre worse off than before:
- You havent reduced your debt. Youve just moved it to a different place.
- Youre actually deeper in debt. The 3% fee added $15 to your total obligations.
- The debt is more expensive. Credit card interest rates are usually higher than those on student loans. Therefore, carrying that $500 in debt will cost you more in the future.
It goes without saying that even if a student loan servicer allowed you to pay your bill with a credit card directly, it would still charge you a “convenience fee” for the credit card processing fees. “.
Is it worth it for rewards?
Perhaps you’re considering using a credit card to make payments on your student loans in order to get rewards. It would be a bad idea to receive points or cash back on a $500 purchase if you were going to spend the money anyhow. It’s highly likely that the processing costs you’ll incur will outweigh the rewards.
How about a 0% card?
Placing the payment on a credit card with an introductory 200 percent annual percentage rate would, at the very least, save you from having to pay interest in the near future. But youd still have to pay the processing fees. And should you fail to settle the balance by the end of the 200 percent period, you will be confronted with exorbitant finance charges.
Under certain highly particular circumstances, you may be able to save money by using a balance transfer to a credit card to pay off your entire student loan. However, this isn’t the route for you if you’re struggling financially and are only trying to find a way to pay this month’s bill.
Alternatives to paying your student loan with a credit card
You may be considering using a credit card to pay off your student loans if you don’t have any cash on hand. But there are better options:
Enroll in an income-driven repayment plan. If you are unable to make your federal student loan payments, speak with your servicer about signing up for an income-driven repayment plan. Payments under these plans are capped at a percentage of your disposable income; in the event that you are unemployed, there will be no payment. Additionally, it increases the repayment period to 20 or 25 years. Your remaining loan balance is forgiven when you reach the finish.
Request a deferment or forbearance. Request a payment suspension from your private student lender or federal student loan servicer. If you need a break from payments, you can apply for a loan forbearance or an unemployment deferment for federal loans. Due to unforeseen circumstances, the majority of private lenders provide options for temporarily suspending or reducing payments. Interest will be charged on your loan during any pause, increasing the total amount you owe when you resume repayment.
Find the right credit card for you.
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FAQ
Can you make student loan payments with a credit card?
In general, student loan servicers do not accept credit cards. For one thing, federal regulations generally prohibit it. Additionally, the party accepting the credit card must pay processing fees associated with each transaction. Certainly, lenders won’t cover those costs in the same manner as retailers do.
Can I pay my student loans with my Amex?
No, you cannot use an Amex card to directly pay off your student loans. Credit card payments are not accepted by loan servicers, and using a credit card to pay off student debt is prohibited by U.S. S. government.
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 I pay student loans with credit card discover?
Certain bills, such as mortgage, student loan, and auto loan payments, are generally not able to be paid with a credit card. However, there are methods for using your credit card to cover these and other costs. With certain credit cards, you can obtain a cash advance by borrowing money over your credit limit.
Read More :
https://www.nerdwallet.com/article/credit-cards/pay-student-loans-credit-card
https://money.usnews.com/loans/student-loans/articles/can-you-pay-student-loans-with-a-credit-card