Is It Worth Paying Tuition with Credit Cards to Get Rewards?

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With so many great credit card offers out there, it’s no wonder those potential rewards can sound tempting to you. Perhaps you’ve even considered paying your tuition with a credit card to earn rewards like cash back or airline miles.

But, while it may sound like a good idea on paper, it’s not so easy in practice. The drawbacks may, in fact, outweigh the benefits if you pay tuition with a credit card. Here are a few things to keep in mind.

Benefits if you pay tuition with a credit card

We all know getting a degree can be expensive. One year at a 4-year public university cost $9,410 on average for in-state students, while a year at a 4-year private university will set you back $32,405.

By placing such a large expense on a credit card, the potential rewards are significant.

For example, if you have a card that offers 1% cashback on all your purchases and you charge $9,000 for tuition costs, you could earn $90 in rewards. That’s a big bonus for a transaction you would have made anyway.

Beware credit cards and processing fees

While earning rewards can sound like a great idea, pulling it off can be difficult.

Many colleges and universities will add a processing charge to your bill if you opt to use a credit card. So when you pay your tuition, hidden costs in the form of fees could pop up.

If you’re considering paying tuition with a credit card, it’s best if you attend one of the few schools that do not charge a fee. Check with your financial aid office to see if your school is one of them.

Consider the interest charges on credit cards

Even if your school is one of the few who doesn’t charge a processing fee, there are other downsides to paying tuition with a credit card.

Compared to other payment options like student loans, credit cards are much more expensive. Especially if those credit cards carry an interest rate higher than 15.00% APR.

While you may want to use a credit card to pay for tuition, doing so can cause you to get overwhelmed with debt. Once interest starts building, it can be hard to dig yourself out of credit card debt.

Additionally, if you don’t pay off your tuition charge in full by the next month, you could end up racking up interest charges. And, in the process your tuition payment could balloon in size. Talk about a lose-lose scenario.

Impact on your credit score

Credit card reporting agencies like TransUnion, Experian, and Equifax look at your credit utilization to determine your credit score. That means they look at how much of your available credit you use each month.

When you make a huge purchase, like a tuition payment, you use up a huge percentage of your credit line. That move can reduce your overall credit score. Which, in turn, can make it harder to get a good interest rate on an auto loan or even get approved for an apartment.

If you pay tuition with a credit card, you could hurt your future financial credit standing.

There are other options

Again, paying tuition with a credit card only makes sense if you go to a school that does not charge a fee. And, if you can afford to pay off the balance quickly.

However, if your situation doesn’t meet either of those criteria, you are probably better off paying for school in another way.

While student loans sometimes get a bad rap, they are much more cost-effective than a credit card. With interest rates usually between four and eight percent, you will incur less debt from interest. Credit cards don’t even come close to those interest rates.

Student loans also offer easier repayment terms. Rather than worrying about paying off your credit card by the next statement period, you can have ten years or more to pay off your student loan debt.

Additionally, with a student loan, you can often defer payments until after graduation. With a credit card, you have to start making payments right away, even if you’re in school full-time and unemployed.

If you are looking for ways to pay for school but don’t qualify for federal student loans, you can still get help covering the cost of college through private student loans.

Private student loans can cover your school costs when federal student loans or grants are not an option.

In the end, if you need money to pay for college and are thinking of using a credit card to fill the gap, make sure you compare offers from private lenders to find the best one for your financial situation.

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* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.

1 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

(1)All rates shown include the auto-pay discount.  The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.

Information advertised valid as of 11/4/2019. Variable interest rates may increase after consummation.


2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3 Important Disclosures for Discover.

Discover Disclosures

  1. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit DiscoverStudentLoans.com/Reward for any applicable reward terms and conditions.
  2. View Auto Reward Debit Reward Terms and Conditions at DiscoverStudentLoans.com/AutoDebitReward.
  3. Aggregate loan limits apply.
  4. Lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest interest rate offered on the Discover Undergraduate Loan and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.00% as of January 1, 2020. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please visit discover.com/student-loans/interest-rates for more information about interest rates.
Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

4 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).

  1.  Rates are as of July 1, 2019 and include auto-pay discount. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment. Variable rates may increase after consummation.

5 Important Disclosures for Citizens.

Citizens Disclosures

Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2019, the one-month LIBOR rate is 1.70%. Variable interest rates range from 2.80% – 11.06% (2.80% – 10.91% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.72% – 12.19% (4.72% – 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.

Please Note: International Students are not eligible for the multi-year approval feature.

2.84%
10.97%
1
Undergraduate, Graduate, and Parents

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2.87% – 10.75%*,2Undergraduate and Graduate

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2.80%
11.37%
3
Undergraduate and Graduate

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3.52% – 9.50%4Undergraduate and Graduate

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2.80% – 11.06%5Undergraduate and Graduate

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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