Paying off a student loan with a credit card can be risky and expensive. Hence, there is a need to understand the concept of student loan payment with a credit card.
This article will explore a student loan, the benefits of paying off a student loan with a credit card, the best credit cards to pay off a student loan, and how to pay off a student loan with a credit card.
What is a Student Loan?
A student loan is borrowed from the federal or state government or private companies to pay for higher educational expenses, which must be repaid later with interest.
Government agencies/organizations and private organizations offer student loans to students to make college and university education easily accessible to those who do not have the resources. The terms and conditions of the loan vary depending on the lender.
Benefits of Paying off Student Loans with a Credit Card
Below are the advantages of paying off your student loan with a credit card:
- Payment with a credit card enables you to earn rewards for spending.
- It buys you some time before the payment is due.
- It secures a 0% intro APR for a limited time.
Best Credit Cards to Pay off Student Loans
Below are some top-pick credit cards to be considered for paying off a student loan:
- Bank of America Premium Rewards credit card.
- Chase Freedom Unlimited.
- The Blue Business Plus Credit Card from American Express.
- Capital One VentureOne Rewards credit card.
- Amex Everyday Preferred Credit Card from American Express.
- Citi Double Cash Card.
- Capital One Venture Rewards credit card
How to pay off a Student Loan with a Credit Card
You can pay off your student loan with a credit card in various ways:
Charge your Payment on Your Card
Some private student loan companies accept credit cards as a method of payment. You can make payment through the website, although some lenders prefer to be contacted first.
For example, Firstmark Services is a major loan servicer for private student loan organizations that allows the use of credit cards, but their customer service department must be contacted first.
Using a Third-party Service
This involves using a third-party payment processing organization. The third-party service is paid with your credit card, and you provide them with your loan servicer information.
The payment processing organization then pays the servicer through an accepted payment method on your behalf, such as a paper check or wire transfer.
Cash Advance or Convenience Check from Your Credit Card
You can take out cash advances or request a convenience check with your credit card. When you request a convenience check, the issuer will send a blank check that you will write out to your loan servicer.
In the case of a cash advance, the issuer will deposit the funds into your bank account. Then, you can use it to pay your loan servicer.
Complete a Balance Transfer
Take advantage of a balance transfer credit card by moving your loan balance to a new credit card. Some credit card companies allow loan transfers to a credit card, including your education loan.
If you qualify for a 0% introductory APR, you could have some months to pay back the balance without gathering high-interest fees. You can save money if you pay off your balance before the end of the promotional period.
Frequently Asked Question
Below are some frequently asked questions.
Can I pay off a Federal Student Loan with a Credit Card?
You can’t pay off a federal student loan with a credit card.
What is a Student Loan?
A student loan is a financial aid given to students to help pay for their school expenses, such as tuition fees, books, and living expenses, which must be repaid with interest.
Must Student Loans be Paid Back?
Student loans are required to be paid back. However, the loan can be forgiven or discharged in certain situations.
Is the Student Loan Interest Rate Negotiable?
It is impossible to negotiate student loan interest rates from the government since they set the rates. However, interest rates of student loans from private lenders can be negotiated for a lower rate.
Paying off your student loan with a credit card comes with high risk or a high reward, meaning it has its benefits and drawbacks. When making a student loan payment, you should consider using a card that earns the most rewards on payment.