Can You Pay Student Loans with a Credit Card?

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Ben Luthi

By Ben Luthi

January 20, 2021

Using a credit card to pay off your student loans is technically possible, but it’s generally not a good idea. 

If you’re considering using your card to make a payment toward your student loans or pay them off in full, here’s what you need to know and why you should think twice before doing it.

How to Pay Off Student Loans With a Credit Card

There are a couple of ways you can use your credit card to make payments on your student loans.  

One appeal to using a credit card is to potentially earn rewards on the transaction. And while federal loan servicers don’t allow you to pay your monthly bill directly with a credit card (private lenders typically don’t either), you can make payments through an intermediary like Plastiq. 

The catch? You’ll pay a 2.5% fee on all credit card payments. Currently, there aren’t any credit cards that offer a rewards rate higher than that on an ongoing basis.

The second way you can make student loan payments with a credit card is through a balance transfer check. Credit card issuers typically send these at random, but in some cases, you may be able to request them.

Balance transfer checks typically offer an introductory 0% APR promotion for a set period, making them incredibly appealing, even compared to student loan rates. After the promotional period ends, however, the transaction incurs interest at the account’s regular APR. What’s more, you’ll typically have to pay a balance transfer fee, which can range from 1% to 5% but is usually in the 3% to 5% range.

Why Paying Student Loans With a Credit Card Is a Bad Idea

Credit cards can be an excellent financial tool, especially when you can pay off your balance in full every month to avoid interest. But mixing them with student loans is almost always a bad idea. 

The primary reason is that credit cards aren’t designed to help you pay off debt more quickly. With no set repayment term and a minimum payment that’s just a fraction of your balance each month, it’s easy to get complacent. 

If you make your regular monthly student loan payment and don’t pay it off before your credit card’s due date, you’ll end up paying credit card interest on top of the interest already included in your student loan payment. The longer you go without paying it off, the more interest you’ll pay.

Using a balance transfer check with an introductory 0% APR promotion can be a way to get around that. But again, if you don’t pay the balance in full before the promotional period ends, you’ll end up paying interest on the remaining balance at a much higher rate — the average credit card interest rate is 16.88%, according to the Federal Reserve.

In other words, while the short-term appeal of earning rewards or getting a break on interest can be strong, the dangers of using credit cards when you don’t need to pose a significant long-term threat to your financial health.

Using Credit Cards to Repay Student Loans Faster

While you can’t actually pay your student loans with a credit card besides in the ways mentioned above, you can use credit cards to help pay down your balance. Use a credit card that offers cash back rewards, and apply that cash back earned towards your student loans. The key to this working is charge your normal everyday essential purchases, such as gas and groceries. Pay off your credit card balance every month in full to avoid paying interest. Don’t use this as an excuse for unnecessary spending, and make it a priority to pay it off. 

The Sallie Mae Accelerate credit card provides you with a cash back bonus when you use your card rewards points to pay off their student loan. The Accelerate credit card features 1.25% cash back on all purchases every day with no cap or expiration and a 25% bonus on cash back rewards that are used to pay down any federal or private student loan.

If you are struggling with student loan debt, there are ways you can lower your student loan payments, including enrolling in an income-driven repayment plan, temporarily going on a deferment or refinancing student loans to lower your interest rate. Keep in mind refinancing any federal student loans means a loss in many benefits – income-driven repayment plans, any federal student loan forgiveness programs, generous deferment options, a death and disability discharge, and more.

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