Of course, your college may allow students to pay tuition and fees with a credit card. But, like partying the night before a semester, that’s probably not a good idea.
Paying for anything with plastic requires a plan to quickly get rid of your balance. This prevents interest charges from accumulating. Additionally, many schools charge a “convenience fee” which could cost more than the value of the reward points or cash back rewards you hope to get on your card.
Here’s what to weigh before using one type of credit to pursue another.
Before waving your card, check to see if the school charges an additional fee, called a convenience fee, for accepting payments made with plastic.
Colleges with convenience fees charge an average of 2.75% of the total payment, according to a survey of 410 institutions by the National Association of College and University Business Officers. This means that if you pay $ 2,000 for the tuition, your card will be charged $ 2,055. The larger the payment, the higher these fees will be.
If your credit card offers cash back or travel rewards depending on how much you spend, the idea of charging for your tuition might make “Free Airline Ticket” blink in front of your eyes. But do the math first.
On a 1.5% cash back credit card, you’ll earn $ 30 in rewards on a $ 2,000 charge. A 2.75% convenience fee of $ 55 will negate more than that.
You’re more likely to save money if you’ve recently gotten a credit card with a signup bonus – say, if your card offers $ 200 back after spending $ 1,000 in the first three months. But even then, if a convenience fee were applied, it would eat away at those rewards.
Community colleges are the type of school most likely to accept credit card payments – and the least likely to charge convenience fees – according to the National Association of College and University Business Officers survey. They are also the cheapest, according to the College Board.
But even then, it’s not a good idea to pay with a credit card if you plan to carry that balance from month to month. Unless you have a card that does not charge interest during an introductory period, having a balance could mean paying interest charges. For example, leaving a balance of $ 2,055 on a card with an annual percentage rate of 17% will earn about $ 29 in interest in the first month alone.
Other financial aid options
Know that you don’t have to pay for school out of pocket.
Fill out the free application for federal student aid, known as the FAFSA, to be eligible for federal grants, you do not have to repay. Students in financial need can get a Pell grant, for example, of up to $ 6,095 for the year. The amount you will receive depends on your income, your tuition fees, and whether you attend full-time or part-time.
The FAFSA also makes you eligible for federal student loans, including interest rate – 4.53% for undergraduates in 2019-2020 – are generally lower than credit card rates. Also check scholarships and claim tuition reimbursement from your business if you are working while studying.
Unless you have a plan to get rid of your balance quickly – and you’ve already exhausted all other financial aid options – paying for your education on credit doesn’t make the note.