You can pay a loan with a credit card directly in the rare cases it’s accepted, or by using either a credit card balance transfer or a third-party money transfer service to pay the loan. Most auto lenders, mortgage companies, and student loan providers will not accept credit cards as a form of payment for loans, and money transfer services can be expensive.
If a lender won’t let you pay a loan with a credit card directly, try to:
Use a balance transfer credit card. Balance transfers are most commonly used to transfer credit card debt to a lower-APR credit card, but you can often use them to transfer loan debt, too. The balance transfer credit card issuer will make a payment to your lender for the amount you want to transfer, shifting that balance to the credit card. Just make sure your lender and your card issuer are not the same company – if they are the same lender, the transfer will be declined. Also, consider whether or not a balance transfer is a good idea for your situation.
Make loan payments with a third-party payment service. Some payment services, such as Plastiq or Western Union, allow you to pay bills with a credit card when you wouldn’t be able to otherwise. It’s not free, however – and in most cases, it’s not even cheap. Using these services with a credit card will rack up transaction fees that vary depending on which service you use, but typically the fees range from 2% to 3%. Not to mention that using a credit card with these services may count as a cash advance to your card issuer, which comes with its own fees and APRs. And in the case of Western Union, your lender may not accept this form of payment.
Unless your lender accepts credit card payments directly, it’s a good idea to consider the costs and benefits of paying a loan with a credit card – whether by third-party payment service or a balance transfer – before you do it.
For instance, if you aren’t able to pay off your credit card balance at the end of a balance transfer credit card’s promotional APR period, you’ll rack up expensive interest charges. And with balance transfers, there are usually balance transfer fees. On the other hand, if your third-party payment ends up logged as a cash advance on your credit card, there’s no grace period for that debt, and cash advances typically have their own higher APR. Plus, there are usually fees that come along with cash advances.
But if you’re in a position where paying with a credit card will avoid loan default, then these costs may be worth it.