3 Ways to Use Credit Card Rewards to Pay Down Student Loans

credit card rewards student loan

The world of credit card rewards can be enticing. For savvy credit card holders, earning rewards can mean free vacations, hotel stays, and more. But did you know that credit card rewards can also help you pay back your student loans? They can!

Of course, using credit card rewards for student loans is only a good idea if you are a responsible credit user and can pay back your balance in full each month.

Otherwise, it’s simply not worth it. But if you’re already using credit cards responsibly, why not get credit card rewards to help pay student loans?

Here are three ways you can use credit card rewards to pay down student loans.

1. Redeem credit card points toward student loan payments

All credit cards are not created equally. The credit cards that offer the most bang for your buck are typically rewards credit cards. These cards may have an annual fee and are usually reserved for cardholders with good credit, but come with perks such as accruing miles, cash back, or points.

One of the best rewards cards for paying back student loans is the Citi ThankYou Premier card. Using this card, you can use your ThankYou Rewards to make student loan payments!

Jacob Wade, blogger at I Heart Budgets used this very strategy to pay down $1,100 on his student loans. Wade and his wife both signed up for the credit card and earned the introductory bonus points after meeting the spending requirement.

They reached this goal by placing all of their bills on the credit card (if you can’t reach the spending requirement with your regular bills, it’s probably best to not try this strategy). Once they reached the spending requirement, they were each awarded 50,000 ThankYou points.

All in all, with the bonus and their points accrued from spending, they were able to cash out $1,100 by opting for the student loan redemption in the rewards section of the site. (Read more about their student loan success story here.)

If you try this option, your student loan payment would be mailed to your loan servicer, so it’s important to check with your servicer first to make sure they accept third-party checks and find out if there’s a special mailing address.

Aside from using the Citi ThankYou card, you can use just about any cash back rewards credit card to pay student loans.

For example, let’s say you get one percent back on all your purchases. Typically, when you redeem your rewards, you can opt for a reimbursement on your credit statement, or receive a check, direct deposit, or other form of payment for the reward amount.

Rather than taking the balance credit, you can put that money toward your student loans instead. If used properly, your credit card can actually earn you money instead of costing you.

2. Get the right kind of card to pay down student loans

There are many reward credit cards out there, but you can be strategic with the type of credit card you choose to help you pay down your student loans.

The Upromise MasterCard® is specifically designed to help you pay down eligible student loans (this option is also good for parents wanting to build college savings). It offers a strong cash back program, with 5 percent cash back for qualified travel, restaurant, and online purchases; 2 percent on department stores and movie theaters; and one percent on everything else.

The card also has no annual fee, making it an attractive option for student loan borrowers (and pretty much everyone else!).

3. Sign up for specialty rewards programs

Another way to earn credit card rewards for student loans is to sign up for specialty rewards programs.

The Upromise program is a great example, which you can take advantage of using any credit or debit card — not just the one I mentioned above — and earn cash back when you shop online at qualifying restaurants, retailers, and more.

You can link your student loan account and Upromise will automatically transfer your earnings to your loan account each month.

Final word

Using credit card rewards to pay student loans can be a unique way to make a dent in your payments and actually earn money from things you would spend money on anyway.

Keep in mind, most loan servicers don’t actually allow you to pay your student loans using a credit card. But you can still leverage credit card rewards to help chip away at your student loan debt.

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. In addition, it’s key to keep your balances low, as your credit utilization ratio, or how much of your credit limit you use, does greatly affect your credit score.

If used responsibly, credit card rewards can help you pay off student loans that much faster, so you can say goodbye to debt.

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