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Paying College Tuition With a Credit Card

Many (but not all) schools allow paying college tuition with a credit card. In some instances, using a credit card to pay for tuition can earn you rewards and repayment flexibility. On the other hand, the processing fees and interest rates could outweigh these benefits. Depending on your financial situation, paying college tuition with a credit card may not be the best choice. Continue reading to learn more about the pros and cons of using a credit card to pay for tuition!

Also see: Credit card vs. debit card: Which is better?

Pros of paying tuition with a credit card

Paying college tuition with a credit card is possible for most schools. In some cases, it can be a good option.

First, you should only pay college tuition using a credit card if your school doesn’t charge a processing fee. Since the average processing fee is 2.6%, you could lose any rewards benefits. For example, if tuition is $20,000, and the credit card fee is 2.6%, you could end up losing $520 extra. 

On the other hand, if your college does not charge a processing fee, you could earn rewards for paying with a credit card. If your credit card offers 1% cash back on payments, you could earn $200 on that $20,000 payment. Additionally, some credit cards offer an annual bonus for customers who spend a certain amount. Depending on how much the bonus is, it could be worth it to pay tuition to reach the spending requirement. Just be sure that you can make your repayments in full and on time!

Cons of paying tuition with a credit card

Paying tuition with a credit card can earn students rewards as long as there is no processing fee. Though, not many schools don’t have a credit card processing fee. surveyed 300 colleges in 2016, and 147 of them charged for using a credit card. Be sure to check with your school before paying with a credit card in order to earn your rewards. 

Additionally, the credit card’s interest rate could cancel out those rewards. In 2021-2022, federal Direct loans had an interest rate of 3.7%. This is a significantly lower interest rate than that of credit cards, which average 16.2%. If your credit card payments aren’t made in a timely manner, any rewards you earn will be canceled out, and you could end up paying more than you would have with student loans. 

Using a credit card to pay tuition could also negatively affect your credit score. Missed payments will hurt your payment history and drop your credit score. Payment history is the biggest factor in calculating a credit score, so missing the repayment for tuition will decrease it. If you don’t pay off the balance quickly, your credit utilization will increase. The more debt you have, the more your credit score could drop. It could also affect your credit mix. If you only use a credit card, you’ll miss out on the positive contribution that student loans and other forms of credit could make to your credit score. 

See also: How do student loans affect credit?

Lastly, credit card payments typically have less flexible repayment assistance. If money is tight, you have no choice but to find enough to make the minimum payment or miss the payment, which will harm your credit score. Student loans, on the other hand, can offer more flexible repayment options like income-driven repayment plans and deferment. 

See also: All about income-driven repayment plans

Other options

Paying college tuition with a credit card should be a last resort option unless you’re certain that the pros will outweigh the cons for your financial situation. Other options for paying tuition include scholarships, grants, work-study and federal or private student loans. Many students use a combination of all these to cover the cost of college.

This doesn’t mean that you shouldn’t use a credit card at all to pay for college expenses. If you want to earn rewards or other credit card benefits, consider using one to pay for other expenses such as textbooks, food, or school supplies.

See also: How to get your student loans deferred