When they graduated in 2021, students had an average debt of around $39,351 due to student loans. Wouldn't it be good to collect credit card points along the road, even if you have to return tens of thousands of dollars in the coming years? Getting one percent of your money back would put part of that money back into your pocket.
Can You Pay Student Loans with a Credit Card?
The Department of the Treasury in the United States no longer accepts credit card payments for student loans. Despite this, others still look for methods to move the amounts on their student loans to a credit card that offers cash back or other perks. However, before you make that transfer from your student loan lender to your credit card provider, you'll need to consider a few things first. Let's discuss whether or not you can earn points for using your credit card to pay down your student loans, how to do so, and whether or not this is a smart idea. This is because credit card companies typically offer cash back incentives to customers who use their cards for purchases. It is also important to consider if you are the sort of person who always pays the entire balance on their credit card account at the end of each month.
Getting the Right Card to Transfer With
To begin, you will need to submit an application for a credit card that offers a significant initial bonus in addition to regular cash benefits and get it accepted. Keep an eye out for bonuses such as 1% cash back on all transactions and something like $500 cash back if you purchase $5,000 or more during the first three months of using the credit card. These credit cards are often intended for those with credit scores ranging from very good to exceptional.
Remember that not all credit cards are made equal, which means that certain cards will not enable you to transfer the amount of an existing loan to another card. Therefore, you need to double-check that you have the appropriate card. The opportunity to transfer the number of their student loans to one of their credit cards. In addition, several credit cards have a 0% introductory APR rate on balance transfers for a limited period.
What Happens After You Make a Payment?
After making the payment, you should immediately check your credit card account to ensure that the transaction was posted as a purchase and not a cash advance. You will satisfy the conditions to get the sign-up bonus and earn 1% back if all goes according to plan. After that, you will want to make sure that you pay your credit card account in full and on time so that you do not accrue any interest or fines for being late. If you implement this strategy, you can make significant progress toward three different monetary objectives. First, you will reduce the principal balance of your student loans; second, you will avoid paying the interest that you would have incurred throughout those loans; and third, you will earn significant credit card rewards.
Read the Fine Print
Before you complete the transfer, you must thoroughly understand the limits and the terms and conditions associated with your card. To begin, you will want to make certain that you are only able to transfer the maximum amount that you can pay back to the credit card company. Second, if you're planning to transfer your balance, you should know that certain financial institutions charge a higher interest rate for balance transfers. Therefore, if you cannot make the entire payment after the billing cycle, you risk being subject to a greater interest rate than you would be for a standard purchase transaction. In the first six to twelve months after opening a new card, you can be eligible for balance transfers with reduced or waived fees if the card is brand new.
How to Make Your Payment?
Are you unable to do a balance transfer? Get in touch with the corporation that issued your credit card for a convenience check. You will write this just as you would write a check from your checking account, except that it will be drawn on your credit card instead. However, before you make that transfer from your student loan lender to your credit card provider, you'll need to consider a few things first. However, remember that convenience checks may sometimes come with a high-interest rate; thus, you will want to know what rate and costs apply to the account in question.
