Can You Pay Your Student Loan with a Credit Card
Not many people dare to use a credit or debit card to pay their student loans, simply because credit card companies charge quite a lot higher interest rates than student loan servicing companies. However, you can actually pay less interest if you choose the right credit card company to pay off your student debt, but you need to do a bit of research first, because it is definitely not as simple as it sounds.
First and foremost, not every student loan servicing company actually accepts credit card payments, so you need to check with the one that gave you the loan and see whether or not you actually have the option to use a credit card to pay off your debt in the first place. If they allow for the option to pay off your monthly debt payments with a credit card, then you can start gathering all the necessary information about the matter and choose a credit card processing company that will offer you the best services for your needs.
Nevertheless, there are a few things you should consider beforehand, so here’s what you need to know.
You Can Use a 0% APR Balance Transfer
You can use a credit card balance transfer to pay off your loan, which means you will transfer your balance to another credit card, that is, to a new account at a credit card company of your choosing. Many credit card companies offer the option of a 0% APR balance transfer (interest-free), which undeniably sounds great, but there is a catch. You need to be eligible for the transfer and have a great credit score.
Furthermore, in order to use a 0% APR balance transfer, you need to use a balance transfer check. This check is just like any other check, expect it is used to pay off your student loan with the balance transfer. It is issued by your credit card company and, once you put the cash in your bank account, you will pay off your student loan with a balance transfer with no interest whatsoever. However, there are fees for using a balance transfer check, so make sure you learn about them.
What’s important to remember is that a balance transfer check is not a cash advance check, which requires interest to be paid, whereas a balance transfer check comes with a 0% interest promotional period. Also, you need to make sure you can actually pay off your debt during that promotional period (usually 18 months) because, as soon as it is over, you will be charged a regular APR, which is much higher when it comes to credit cards than the interest you would pay with your student loan servicing company.
You Can Use a Rewards Credit Card
You can earn reward points for paying off your student loan if you use a rewards credit card. Again, you need to have an excellent credit score in order to be able to use a rewards credit card but, although you may be charged an annual fee, you will be able to get cashback and use reward points to pay off your student loan payments.
However, you need to check whether or not your student loan servicing company will charge you certain processing fees for paying off your student loan with a credit card because, if there are processing fees, your student loan will get much costlier, in which case your reward points simply won’t be enough to cover them.
Paying off your student loan by using a credit card can be tricky, which is exactly why you need to gather all the information you need and know exactly what fees you may be charged. More importantly, you need to calculate everything and see whether or not you can actually manage to pay off your credit card each and every month because, if you don’t, you will end up paying a much higher interest rate.
If you decide to go for it and start using a credit card to pay off your student loan, make sure you check out the credit card processing company ratings for every credit card company you consider, as that will help you make a better decision and choose the right credit card company for your needs.