Paying for tuition is costly.
A college education comes with a hefty price tag, making students wonder how they can cover the cost. That often can lead to the idea of paying tuition with a credit card.
While you can pay tuition with a credit card, make sure it’s right for you. This blog explores key factors you should consider before using a credit card to pay for tuition.
When It Does (and Doesn’t) Make Sense to Pay Tuition with a Credit Card
While you can use a credit card to cover tuition costs, it’s important to consider if this makes sense financially. So, before you decide, consider the pros and cons.
Pros of Paying Tuition with a Credit Card
If managed responsibly, paying tuition with a credit card can bring plenty of advantages.
- No Processing Fee
- Potential rewards
- Meeting an annual threshold
- Large Sign-Up Bonuses
- Helps build credit
Credit cards are easy to use and convenient when you need money. If your school accepts credit card payments and doesn’t charge a processing fee, then using it can be nice.
If you have a rewards credit card, you can earn points or miles each time you pay. Another benefit can be that you may qualify for a waived late payment fee if you pay your tuition bill with a credit card.
Also, if your credit card has a high annual spending threshold, paying for tuition on that card may help you reach your bonuses or benefits. Credit card companies may offer sign-up bonuses.
If the account you are going to open or recently opened offers a large sign-up bonus that outweighs the cost of any potential convenience fee, then it may be beneficial to use your credit card when paying tuition.
Lastly, paying tuition with a credit card can help establish a credit history. If you can make timely payments on the credit card, you can see many benefits such as positive impacts on your credit scores and a raised credit limit.
Cons of Paying Tuition with a Credit Card
On the other hand, there are drawbacks to paying tuition with a credit card.
- High-interest rates
- Processing fees
- Negatively impacts your credit
You may pay more in interest if you don’t pay off your balance in full every month. It is strongly advised that if you cannot pay off your entire credit card by the end of the billing period, you should not use a credit card to pay for tuition.
If you are not careful, you can rack up a lot of debt by using your credit card to pay for tuition. The longer the balance remains on your account, the more interest it can compound, which would only increase your college tuition expenses.
Often, a transaction fee of up to 3% may be charged. For example, a $10,000 tuition payment would come with an additional $300 transaction fee. Payments can add up quickly and outweigh any rewards you may earn through your credit card.
In addition, you can negatively impact your credit scores if you miss timely payments, leading to fewer loan options in the future.
Other Ways to Pay for Tuition
While it can be overwhelming, many options exist when deciding how to pay for your tuition.
Students who want to apply for scholarships can find thousands of scholarships by searching online resources or apps.
Specific organizations can also provide scholarships to provide aid to their members. Each scholarship may have different procedures, so it is important to read the application procedures carefully.
Students are also able to apply for multiple scholarships.
College grants are a form of money to pay for college that you do not need to pay back. Start by looking for grants that match your criteria, such as academic merit, financial need or a specific field of study.
After, you need to collect and submit all the required documents, like transcripts, test scores, essays and letters of recommendation. You then apply for the grant before any deadlines.
Of course, you can always follow up to check if your application was received.
Student loans are money borrowed from the government or privately to pay for college. The loan needs to be paid back, including any interest that accrues over time.
Luckily, there is such a variety of loans to choose from that you can research and compare different options before applying for a student loan.
First, you need to complete the FAFSA application, which is used to determine your federal student loan eligibility. Then, if you qualify, you will be provided with a list of loans to apply for.
Various types of employer programs assist you in paying for college. For example, companies such as Target, AT&T, Starbucks, Amazon, and Chick-fil-A offer tuition assistance for eligible students.
Depending upon the company, you may receive a certain amount per year towards tuition, whether pre-paid or reimbursements.
Most colleges and universities offer students the ability to pay for their education in installments. If you cannot make payments in one lump sum, you can make payments throughout the semester or quarter, depending on your school’s policy.
Is It Worth It?
It’s only worth it if using a credit card to pay tuition makes financial sense to you. However, it’s important to highlight that you can explore other options to cover tuition costs, such as scholarships, grants and employer programs, to name a few.
Whether you use a credit card to pay for college tuition or decide not to, it’s always important to monitor your credit. Signing up for a credit monitoring service such as MyScoreIQ helps you monitor your credit scores and provides simulator tools to help you know how certain actions can affect your credit. Then, you can work toward your credit goals.