In general, you can’t use a credit cards to pay you student loan bills (although, there are a few exceptions). But that doesn’t mean some credit cards can be useful while paying off student loan debt.
Sallie Mae launched three new credit cards – one designed specifically for student loan borrowers and the other two offering cash back rewards students can use to repay their student loans.
Here’s what Sallie Mae is offering student loan borrowers with their “triple play” new card line-up:
Sallie Mae Ignite
Sallie Mae says this is a “card designed to help college students establish credit in responsible ways that fuel their independence.” With the Ignite card, cardholders get 1% cash back on all purchases, every day, with no cap or expiration date. Plus, after six consecutive months of on time payments, cardholders will unlock a 25% bonus on cash back rewards earned on all future purchases.
Sallie Mae Accelerate
This credit card provides cardholders with a cash back bonus when they use their 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.
Sallie Mae Evolve
The Evolve credit card gives owners 1.25% cash back on all purchases along with an automatic 25% bonus on cash back earned on the card holder’s top two purchase categories each billing cycle. The idea, Sallie Mae says, is to leverage the card’s cash back bonus component to reap rewards you spend the most on.
How to Use Credit Cards to Repay Student Loans
Sallie Mae is the first credit card provider to offer a credit card which directly helps card holders repay student loan debt. But with a good credit card rewards deal – you can leverage credit cards to pay down student loan debt.
It’s essential to use the credit card the right way, if you’re truly intending to use it to help pay down student loan debt. The worst thing you can do is add on more high-interest credit card debt to the mix.
Here’s how to do it: Don’t overspend and buy things you can’t afford. Use credit cards like you would cash or your debit card, paying for necessities you are already buying – gas, groceries, a cell phone bill and so on. Pay off the balance every month so you don’t end up paying interest.
Credit Cards To Help Pay Student Loans
Capital One Quicksilver Cash Rewards
This credit card offers 1.5% cash back on all purposes, which is a good deal, as many cash back cards restrict cash payouts to specific spending categories. You can also earn an extra $150 if you spend $500 on qualifying purchases within three months of getting the card. You can easily use the cash back rewards to pay your student loan debt.
Capital One – The Savor Cash Rewards Card
This card is great if you dine out a lot, since it offers 4% unlimited cash back on dining and entertainment spending – one of the highest cash back rewards percentages in the industry. You can set recurring redemption levels at either $25, $50, $100 or $200, and the money goes straight into your bank account. But keep in mind that limiting your restaurant visits could help you reduce student loan debt and lose weight at the same time.
American Express Blue Cash Preferred Card
This card offers a 6% cash back reward bonus of all U.S. supermarket purchases, with an annual $6,000 spending limit on supermarket transactions. After that, you get 1% cash back on every purchase over $6,000. That card also offers 6% cash back when you pay for digital media platforms like HBO, Hulu and Netflix.
Three Tips for Getting a Good Credit Card
How can you qualify for a credit card that can help you pay down you student loan debt? First know that according to the CARD Act of 2009, you’ll need to be at least 18 years old (no problem there) and have either a paying job or a co-signer to qualify for a good credit card.
Check your credit score and start building good credit.
You can get a free copy of your FICO credit score (FICO is the benchmark credit scoring index for all credit report) at Annualreport.com. Or, if you pay a subscription for a credit scoring service like Experian or Credit Karma, you can get your credit score there.
Check your credit score to see where you stand before you apply for a credit card.
Any credit score over 660 (the FICO range is between 300 and 800) will likely qualify you for a standard credit card. But for a rewards-based card aim for a credit score of 700 or higher. Get there by paying all your bills on time and keeping your open credit accounts (i.e., loans and credit cards) to a minimum.
Do your homework and research terms of the card.
That’s right, make like you’re back at school and study all of your credit card options before applying for a credit card. In particular, focus on card terms like annual percentage rate (APR), any fees and the card’s credit limit. Make sure to shop around, and get a card that fits your lifestyle best.
If you just graduated, you may not qualify for a cash back rewards card right away. That’s okay. Build your credit first by taking on a standard credit card, and make sure you make timely payments and keep low balances. Keep checking your credit report (which is a good idea, anyway) and when you see it start to rise significantly, go ahead and apply for a better credit card.
What To Do Now:
Start creating your student loan repayment checklist so you don’t miss a step.
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 when refinancing federal student loans, you’ll lose federal loan perks, including the potential for forgiveness and more.