Move over, student loans: there’s another trend for paying tuition in town.
You already use a credit card for practically everything, so why not just charge your tuition, too? This is what students and their families seem to be thinking as they look for new ways to pay for college. Between cash back, points, promotional 0% APRs, and airline miles, paying with plastic can reap rewards ─ but in this case, swiping can come with a catch.
There’s a hack for that
“Some may think they can game the system by using a rewards credit card to earn a little extra on top,” says Robert Harrow, Product Manager at consumer research site ValuePenguin.com.
Let’s say your credit card offers a 1% cash back reward with every purchase you make. Charging a semester’s worth of tuition would be an easy way to earn a few extra bucks, right? (To put that in perspective, $10,000 in tuition would give you a quick $100 back.) Or maybe it’s a convenient way to earn a free flight home for the holidays. That’s not too shabby.
But plastic comes with a price.
Out of 300 schools surveyed by CreditCards.com in 2016, 255 of them (or 85%) typically accept credit cards for tuition payments. Out of these, 145 schools, or 57% of those surveyed, charge fees for using a card. So, if you’re hoping to get a little something back after paying so much for school, you may end up disappointed.
According to the same survey, the average convenience fee schools charge for using a credit card is 2.62%. That $10,000 is now going to cost an extra $262, wiping out any rewards you may be earning just like that.
Think your student loan interest rate is high? Think again
Still tempted to charge your tuition? If your school doesn’t impose a processing or convenience fee, it might be a worthwhile option. But be sure you’ll be able to pay the balance off in full at the end of the month. If not, a credit card should be used only as a last resort – and even then, it’s risky.