Student loans provide financial support that allows you to attend college. However, getting student loans is a long-term responsibility because you have to find ways to pay the loan fast. Failure to pay your student loan can adversely affect your credit score and cause problems when you’re getting an apartment, finding a job, and starting a business.
There are many ways to pay your student loans, and using a credit card is just one. Paying student loans using a credit card allows you to earn rewards and take advantage of 0% annual percentage rate offers. However, you shouldn’t solely focus on the benefits when you’re about to pay your student loans with a credit card; you should also consider the risks involved.
The short answer to the question, “can you pay student loans with a credit card?” is “yes, it’s possible,” but you need to use a payment service as an intermediary. Federal student loan servicers don’t accept credit card payments directly, which is why using payment services is necessary to complete the process.
Some private companies might accept your credit card as you’re paying for your student loan, but keep in mind that they will likely charge you with a transaction fee. This can cause your repayments to increase and can cause financial burdens in the long run.
What Are the Risks When You Pay Student Loans With a Credit Card?
Paying student loans with a credit card doesn’t always make sense. Using a credit card to pay your student loans means that you’ll give up your student loan protections, and you’ll have to pay debts with a higher interest rate. Paying student loans with a credit card will also cause you to incur fees.
When Should You Use a Credit Card to Pay Student Loans?
Paying student loans using a credit card is risky, but there are certain situations where taking these risks is worth it. As long as you know what these situations are, you can still use your credit card to your advantage.
It’s best to use your credit card to pay student loans if your credit card company offers rewards, points, or cashback. Some credit card companies allow you to redeem your earned points or rewards and then use them as payments for your student loans. This will enable you to pay down student loan balances faster and save money during the process.
You can also use credit cards when paying student loans if it offers 0% APR or Annual Percentage Rate. Taking advantage of this offer won’t accrue any interest on your balance during the first six to 21 months, depending on the terms set for the card. You should only pay student loans with a credit card if you can immediately pay the credit card balance at the end of the month to take full advantage of the points you earn.
Knowledge Is Power
Paying your student loans with a credit card comes with benefits, but keep in mind that it also has several risks. If you’re determined to use your credit card to repay your student loan, take the time to research so you’ll have a better idea of how the process works.
The more information you have about repaying your student loans with your credit card, the easier it’ll be for you to manage your expectations. Educating yourself about the matter will also help you foresee possible problems and create solutions early.