Should you pay tuition with a credit card?
Monday, 26 August 2019
Some turn to student loans while others tap into the equity in their home to cover the costs. But today, many schools accept credit cards for tuition, and if done strategically, it can be a convenient and rewarding way to pay.
What you need to know before paying for college with plastic
First, find out if your school accepts payments by credit card. In the past, few colleges and universities accepted credit cards for tuition payments; however, things have changed. A 2016 survey by creditcard.com found 85 percent of the largest 300 public, private and community colleges in the U.S. now accept credit card payments for tuition.
Second, find out if your school charges a convenience fee. While a significant number of the nation's largest colleges accept credit cards to pay for tuition, the majority of these also charged a convenience fee, with the most common fee being 2.75 percent. Others charged a flat fee for each credit card transaction.
Community colleges were the most card-friendly. Approximately, 97 percent accept credit cards for tuition payments and only 8 percent charge convenience fees, the 2016 survey found.
When is paying tuition with a credit card a good option?
When you can take advantage of a low introductory rate.
Many banks offer low introductory rates when you open a new credit card account. These intro rates are typically good for a defined period of time.
If you can get a card with an offer like this, you could take advantage of the introductory period to pay for tuition interest-free. If your school accepts plastic without a convenience fee, this option can be even more attractive. However, paying off the balance within the introductory rate time frame is essential to avoid incurring interest charges.
When you can earn rewards
There are several rewards-based options that might make using your card for college a good move.
Some cards offer hundreds of dollars in points or rewards when you open a new account and spend a specified amount within the first few months. If there are no convenience fees associated with using the card for tuition and you're able to pay off the balance promptly, this could be an rewarding choice. Even if you are charged a convenience fee by the institution, the value of the rewards could outweigh the cost of the fee and make it a worthwhile way to pay.
Other banks offer cardholders big reward bonuses when they reach annual spending thresholds. Putting a large tuition payment on your card could quickly meet that threshold. Again, it's important to factor in the cost of fees charged by your institution, and your ability to pay the credit card balance off before interest charges kick in. But if this is doable, it can be a good choice.
When it's a timing issue
Whether you have a CD maturing in a month or you need to sell some stock, sometimes it might take a few weeks to get your hands on the cash you need to pay tuition. Using a credit card for tuition can make sense in this scenario, particularly if your institution does not charge a convenience fee. Even if the institution did charge a fee, it could be less than an early withdrawal penalty.
Paying tuition with credit cards gives families options and flexibility
Since paying for college can be challenging for many American families, being able to pay with a credit card simply provides more options and flexibility. However, as with any credit card transaction, it's essential to weigh all the pros and cons, and have a solid plan for paying off your credit card balance.
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