You can pay student loans with a credit card by using an online bill payment service like Plastiq, or you can perform a balance transfer. A balance transfer moves your payment obligation from the student loan provider to the credit card issuer.
Paying your student loans with a credit card has benefits and drawbacks. The best part about paying with an online service is that you can earn rewards. If you do a balance transfer instead, you likely won’t earn any. But credit card interest rates tend to be a lot higher than student loan rates. So if you can’t pay off your balance right away, you could end up with more unsustainable debt. A 0% credit card could help, but you typically need good credit or better to get one, and it would only buy you time until interest takes effect.
Here’s how you can pay student loans with a credit card:
- U.S. Department of Treasury rules prohibit making student loan payments directly with a credit card, as of 2017.
- You can use online bill payment services like Plastiq to make payments on your student loans. These services charge your credit card, then send a check or wire transfer to the loan issuer.
- Third-party services charge fees. For example, Plastiq typically charges 2.5% of the transaction amount, although they’ll sometimes have promotions for lower fees.
- If you’re able to pay through an online service, you can earn rewards on what you charge.
- If third-party services don’t work for you, another option is to instead transfer the balance to a credit card. This could get you a temporary 0% interest rate, but you’ll typically need to pay a 3%-5% balance transfer fee.
- If the company doesn’t let you directly transfer the balance, you could use a balance transfer check, which is a check that draws on your credit line instead of a bank account. You can get one from your card’s issuer. Just bear in mind that standard balance transfer rates and fees will apply.
- 10 of the top 15credit card issuers allow balance transfers from student loans: Bank of America, Barclaycard, Capital One, Citi, Discover, PenFed, USAA, U.S. Bank, Wells Fargo, SunTrust Bank.
- Only Barclaycard allows you to earn rewards on balance transfers.
- Federal student loan rates generally range from 4% to 7%, while the average credit card interest rate is almost 19%.
All in all, it’s not a bad idea to pay student loans with a credit card if you can earn some rewards and avoid carrying a balance on your card from month to month. But it shouldn’t be an excuse to put off paying your bills. You should also keep your card’s credit limit in mind. Student loan payments can be fairly large, and you risk hurting your credit score by using more than 30% of your available credit.