Is there a best credit card to pay off student loans? We’ll break down some ways you can use credit card rewards to pay down your student loans.
Find a credit card to maximize financial rewards
Redeem points toward student loan payments
Consider a credit card with a 0% introductory APR
6 credit card do’s and don’ts
Credit cards and student loans: Final word
You can use a credit card for payments you’re already making every month, whether it’s rent, gas or groceries. But this is only a good idea if you can pay back your balance in full each month.
If you’re planning this, it may make sense to consider a rewards card. It’s important to note that rewards cards may have annual fees and are usually reserved for cardholders with good credit. That being said, they come with perks like miles, cash back and points.
If you have some bucket list trips planned, a rewards credit card that incentivizes travel can help you get free flights. Then, you could put the money you would have spent on the trip toward your student loan payments.
For example, as of May 2019, the Chase Sapphire Preferred® Card lets you earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s the equivalent of $750 in travel credits if booked through Chase Ultimate Rewards.
If you’re already spending that cash on monthly bills, it may make sense to put your bills on this card and reap the rewards. Or, you may get a credit card with gas rewards to help minimize the amount you spend on commuting. The point: Focus on how you spend your money now, then look for credit card rewards that fit your habits.
In the past, some credit cards allowed cardholders to link their credit card rewards to their student loan account. While there are no credit cards that currently offer this, you could earmark cashback rewards to pay down your student loans.
For example, Citi allows ThankYou points to be converted into a check to pay your student loan servicer. In this system, 1 point is equivalent to 1 cent. A card like the Citi Rewards+℠ Card rounds up to the nearest 10 points on every purchase, while you can earn 2X ThankYou® Points at Supermarkets and Gas Stations for the first $6,000 per year and then 1X Points thereafter., Plus, earn 1X Points on All Other Purchases.
So, for example, 2,500 points translates to $25 to pay off your student loans.
If you use this option, your student loan payment would be mailed to your loan servicer, so it’s important to see if it accepts third-party checks and find out if there’s a special mailing address.
Of course, you can follow a similar strategy with other cashback rewards credit cards and send the additional check yourself. For example, say you get 1% back on all your purchases. Typically, when you redeem your rewards, you can opt for a statement credit, check or other form of payment. Rather than taking a statement credit, you could ask for a check to put that money toward your student loans to pay down the principal more quickly.
While you may not be able to charge monthly student loan payments to a credit card, it may be possible to get a credit card with a 0% introductory APR and request a balance transfer to move the balance of your student loans to a credit card.
Of course, once you do this, the debt is no longer a student loan, and you need to remember the key word in all this: Introductory.
Some people could benefit from this approach, including those with excellent credit who have access to competitive 0% APR introductory offers. But these 0% rates are temporary, and student loan interest rates are usually lower than typical credit card interest rates.
In other words, if you have an 18-month 0% APR offer, you better plan to pay off the balance in full before the 18 months is up. For example, maybe you got a higher-paying job, are only a year out from paying your loans in full or are receiving financial support to finish paying your student loans from relatives.
If you don’t have a plan in place, it would be better to focus on other strategies that can help you maximize rewards by paying off your credit cards.
If you were wondering how to pay student loans with a credit card, you’ve learned it’s not typically possible. But to effectively use credit card rewards to pay off student loans, it’s important to be strategic. Here are some do’s — and don’ts — to follow.
Do pay your credit card bill in full each month. The interest rates on reward cards can be high, and rewards are mitigated if you carry a balance. Make sure you have a plan in place to pay the bill in full, and don’t use the credit card for just-because purchases.
Don’t ignore fees for credit card payments. Some vendors, such as an apartment management company, may charge a fee for credit card payments. If yours does, you should consider whether it’s worth using your card. For example, let’s say you have a credit card that offers 2% cash back but your vendor charges a 3% fee for credit card payments. You will still pay more if you pay by credit card than you would if you stuck to other payment methods. That said, if a vendor doesn’t charge a fee, it may make sense to automate monthly payments so they are automatically covered by the credit card that offers the highest reward options.
Do pay attention to your credit score. Reward credit cards tend to be approved for people who have good to excellent credit. If your credit score is lower than that, it may make sense to work on improving your score before applying for the card.
Don’t overlook interest rates or APRs. Yes, you are going to pay your balance in full, each and every month (right?). But, sometimes, life happens. A balance that rolls from month to month may make your student loan bill even higher than you intended. Stick to a card with a low APR and pay attention to your interest rate, since this could change over time.
Do assess annual fees. Annual fees for reward credit cards may cost several hundred dollars. Are they worth it? That depends. If you’re only planning to use the card occasionally, the rewards may not be worth the fee. But if you’re going to use the card each and every month to pay your student loans, it’s worth doing the math to see how much the rewards will equal in dollars to ensure the card pays off in the long run.
Do stick to a plan. Reward credit cards may help you achieve your goal of paying off your student loans more quickly than expected, but only if they are used smartly. Again, consider automating your credit card payments so that the balance is always paid in full.
Using credit card rewards to pay student loans can be a strategic way to make a dent in your payments and earn money from things you would spend money on anyway.
For this strategy to work, the key is to make sure you don’t end up overspending in pursuit of credit card rewards, which obviously defeats the purpose.
Be sure to read any fine print about spending requirements and ensure that you pay off your balances in full each month. If used responsibly, credit card rewards can help you pay off student loans that much faster.
The information related to the Chase Sapphire Preferred® Card and the Citi Rewards+℠ Card has been collected by Student Loan Hero and has not been reviewed or provided by the issuer of this card prior to publication.
Student Loan Hero has independently collected the above information related to credit card rewards, which is current as of May 28, 2019, unless otherwise noted.
Melanie Lockert contributed to this article.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.47% APR (with Auto Pay) to 7.59% APR (with Auto Pay). Variable rate loan rates range from 2.27% APR (with Auto Pay) to 6.89% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of August 15, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/15/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.37% effective July 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.27% – 6.89%1||Undergrad & Graduate|
|2.27% – 7.75%2||Undergrad & Graduate|
|2.43% – 6.65%3||Undergrad & Graduate|
|2.24% – 6.67%4||Undergrad & Graduate|
|2.37% – 7.95%5||Undergrad & Graduate|
|2.46% – 9.24%6||Undergrad & Graduate|