Is it possible to use credit cards to pay off monthly student loan payments, in order to pay less interest and reap the benefits of earning credit card rewards? The answers might surprise you.
Can I Use a 0% Balance Transfer to Pay for My Student Loan?
It is possible to use a 0% APR balance transfer from a credit card to pay off a student loan. But — and this is a very big but — there will be a lot of hoops to jump through.
First, you will need to have an excellent credit score and be eligible for a 0% balance transfer credit card. Next, you need to talk with the credit card company to understand how you can use a transfer check.
Credit card companies want you to transfer debt from other credit cards, which is why they offer balance transfers in the first place. In order to use a balance transfer offer to pay off your student loan, you’ll have to make a few calls to ensure you get a balance transfer check. You’ll have to also make sure you understand what kind of fees are involved with using the check. Most cards charge a 3%–5% fee for each balance transferred.
Do not confuse a balance transfer check with a cash advance or “convenience” check! They may look the same, but a cash advance incurs interest immediately, and is never a part of a 0% promotional offer.
Before you go through this whole process, though, you have to calculate whether you can afford this move.
If you have $10,000 left on your student loan, transferring that balance to a 0% APR card and paying it off during the 0% promotional period (typically around 18 months) can save you a lot of time and money paid in interest. However, you will have to commit to paying $556 per month (more for any extra costs the card charges for the transfer) for 18 months to ensure you pay it off during the promotional period. Otherwise, the regular APR will kick in and a credit card’s APR will be much higher than the interest charged on your student loan.
Can I Earn Rewards by Paying My Student Loan With a Credit Card?
It would be ideal to earn reward points on student loan debt, however, many lenders will not accept credit cards as a form of payment. Some may, but will tack on a fee. These fees will make your student loan even costlier, and the reward points will not be enough to cover them. For example, a credit card may offer 1% cash back, so paying 3% in fees for it doesn’t make sense.
Don’t be tempted to use those credit card checks to pay for your loan, either. Again, unless they are specific “balance transfer checks” those checks are considered cash advances, which incur interest immediately, and usually at a much (much!) higher interest rate than for regular purchases, which is even worse than getting hit with a fee for processing a credit card payment on your loan.
Student Loans Are Easier to Pay Than Credit Cards
Remember that it is easier to pay off $30,000 in student loan debt than $30,000 in credit card debt. Federal student loans are eligible for special repayment programs and forbearance and deferment programs. If you lose your job and cannot make your federal student loan payment, you will be able to apply for deferment for up to three years.
See also: 3 Private Lenders That Can Really Save You Money on Student Loans
This is not the case for credit card debt. Also, the high interest rates that come with credit card debt will make it nearly impossible to get rid of debt if you are only making the minimum payments.
Is it possible to use a credit card to pay off student loans? It can be if the credit card company and student loan lender agree to it. However, make sure you know all of the fees and risks associated with transferring your student debt to credit card debt.
How are you doing with your student loan debt?