Is Paying Your Tuition With A Credit Card A Good Idea? - NerdWallet
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Is Paying Your Tuition With A Credit Card A Good Idea?

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Because the cost of college has soared so high in recent years, many people wonder if paying for tuition with a credit card is a good way to offset some of that expense. After all, spending thousands of dollars in one pop is a fast way to earn rewards from your cash-back or airline miles card.

But it’s important to consider the pros and cons of this approach to financing a college education before pulling the trigger. If your college allows you to pay tuition by credit card, take a look at the information below before deciding whether or that option is right for you.

Big costs, big payoff

Obviously, the best reason to consider paying a college tuition bill with a credit card is the potential for earning big rewards with whichever incentive program your card offers. For example, if you have a credit card that offers 1.5% cash back on all purchases and a semester’s tuition costs $10,000, you could earn $150 back in one fell swoop. Normally, that type of return could take months to earn!

This same benefit works for other types of rewards cards, too. Travel credit cards can be particularly lucrative. If your card (or your parents’) earns airline or hotel miles, your point value can easily top 1 cent per point. For example, we value Starpoints at 2.4 cents each. A $10,000 bill paid for on the Starwood American Express would net 10,000 Starpoints, worth a full $230.

Convenience fees take a bite out of rewards

While earning fast rewards is appealing, it’s important to be careful about hidden costs that could result from paying a tuition bill with a credit card.

This is because many universities have started charging a “convenience fee” to use a credit card for tuition payments, which at most schools ranges between 2 and 4 percent of the cost of the bill. The reason that many colleges charge these fees is that they’re trying to offset the cost of the swipe fee they’ll be charged by the credit card company for accepting plastic. If your university charges such a fee, it could easily wipe out any rewards benefit that you were planning to earn by using the card.

For example, going back to a tuition fee of $10,000 per semester, a 2.5% convenience fee will cost you $250. If you were counting on earning $100 cash back from your credit card, the transaction still cost you $150. In this case, you were better off paying for your tuition bill with an old-fashioned check.

It’s important to note, though, that not all colleges charge a convenience fee. Community colleges in particular tend to be more generous about allowing students to pay with credit cards without charging an additional fee.

All this means that it’s important to consult your college’s website or call the financial aid office to be sure you fully understand if and how much you’ll be charged in fees before paying for your tuition with a credit card.

Swiper beware

Aside from being charged a convenience fee, there are other reasons to think twice before paying for your college costs with a credit card.

The main reason that using plastic to pay for tuition is risky is the interest rate charged on most credit cards compared to other options. Most credit cards charge between 15 and 29 percent in interest; this means that if you use a typical credit card to pay the $10,000 semester’s tuition from our example above and don’t pay it off within a month, you’ll be hit with a $125 finance charge right off the bat.

A student loan, on the other hand, will only charge 4 to 6 percent in interest, and offers much more forgiving repayment terms if you find yourself in a situation where you’re unable to repay your college costs right away.

What are the best credit cards to pay tuition with?

Some great credit cards that can earn more than 1% rewards include:

  • The Starwood Preferred Guest from American ExpressAs we mentioned above, we value Starpoints at 2.3 cents each. This means that if your school’s credit card payment fee is under 2.3%, you’ll come out ahead.
  • The Barclaycard Arrival Plus™ World Elite MasterCard®This card gives 2 miles on every $1 spent, and when you redeem as a statement credit, you get 5% credited back to your account.
  • The Capital One QuicksilverIf your school doesn’t charge extra for paying by credit card, and you’re no fan of annual fees, the Capital One Quicksilver’s your guy. It earns 1.5% cash back on every dollar you spend – no caps, no fuss. It’s a solid flat-rate earner for those who don’t like the Starwood and Arrival Plus’s annual fees.

The bottom line: paying for college tuition with a credit card is only beneficial under a very specific set of circumstances. Because of the risks and fees that go along with paying for university costs with a credit card in most cases, you’re probably better off seeking out other financing options.

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