Pay Student Loans With A Credit Card

Pay Student Loans With A Credit Card

When it comes to paying off your student loans, there are plenty of options. You can pay them off over time with a standard loan, you can find an affordable payment plan with your lender or servicer, or you can use a credit card. While this may sound like an easy solution to getting rid of your debt faster than expected, it’s actually one of the least-effective methods for paying off student loans.

Should You Pay Your Student Loans With A Credit Card?

Paying student loans with a credit card is not a good idea. Credit cards have high interest rates, transaction fees and low limits. They can also lead to defaulting on your student loan payments, which will hurt your credit score and make it harder for you to get approved for other types of loans in the future.

There are better ways to pay off student loans than using a credit card:

  • Pay an extra $100 each month toward your student loan balance until it’s paid off so that you don’t accrue any additional debt from interest charges or late fees
  • Ask if there is an income-based repayment plan available through the federal government or if there’s another way that could lower the amount of money being paid toward your student loan(s)

The Bottom Line

There are a few exceptions where it’s not necessarily a bad idea to use your credit card to pay off student loans. For example, if you have an offer that offers 0% interest for a long period of time, like in the case of balance transfer offers, you may be able to get better terms by paying off your student loans with a credit card and then transferring it back over to your student loan provider once the introductory period has expired.

Another exception is if you have good credit scores and can qualify for rewards points on top of getting lower interest rates on the student loan payments by using a credit card. However this is only viable if you have the discipline and self-control necessary not to use those rewards points or cash back as “free money” that might encourage unnecessary spending.

While it’s usually not a good idea to use credit cards to pay off student loans, there are a few exceptions.

While it’s usually not a good idea to use credit cards to pay off student loans, there are a few exceptions.

  • Pay the balance in full each month. You should only use this card for your student loan payments and nothing else. That means you shouldn’t carry a balance on the card or make any other purchases with it.
  • Make sure you don’t have an annual fee or an interest rate higher than your student loan rate (or at least very close). Annual fees can be as high as $400 per year, so make sure yours isn’t higher than that if you’re going to go this route! The same goes for interest rates—if it’s 1% higher than what your student loan’s interest rate is already charging, then consider another option!

If you have high-interest student loans, using a credit card to pay them off could be a good idea. However, it’s important to consider all the factors before making this decision. If you decide to take this route, make sure your credit limit is enough to cover the bill and that you set aside money each month for any other expenses that might come up (like an emergency room visit).

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