Having a credit card for student loans may make sense for you, but you should acquire all of the facts before deciding how to best manage your student loan debt.
While most credit card interest rates are higher than student loan interest rates, looking for credit cards with introductory APR offers can allow you to stop paying interest on your transferred student loan debt for the introductory period.
Building credit may not be top of mind when you’re in school, but it’s critical for your financial future. Getting a student credit card is a great way to start building a strong credit history and practicing responsible credit behavior. After graduation, it will be easier to buy a car or rent an apartment if you have strong credit.
Students in college, overseas students, and non-traditional students can all find a wonderful card to help them start establishing credit. Below are our top selections for the best student credit cards, along with tips on how to make the most of them.
What are my Options for Repaying my Student Loans?
Balance transfers on credit cards aren’t your only option for repaying student loans. You can also pay them directly (in accordance with your loan agreement), through a credit card cash advance, or through a special repayment plan negotiated with your lender.
Your repayment options for student loans are as follows:
Pay off your loans in compliance with the provision of your promissory note. When you take out a student loan, you sign a promissory note that specifies when the loan is due and the interest rate. Repaying your student loans as agreed will most likely provide you with the most flexible terms and the lowest interest rates.
Use one or more of your credit cards to get a cash advance. Cash advances on your card(s) may be available, which you can use to make student loan payments. Cash advances, on the other hand, may trigger a high APR and increase your credit card balance, making this a costly option.
Negotiate a payment plan with your loan provider. For qualified borrowers, federal loans provide several repayment options, including extended repayment, graduated repayment, and income-based repayment. Private loan providers are not required to provide these options, but they may be willing to work with you—or offer temporarily reduced payments if you can demonstrate financial need.
Student Loan Interest Rates Vs. Credit Card Interest Rates
With the exception of balance transfer cards, which typically offer extremely low rates for a limited time, student loan interest rates are generally lower than credit card interest rates.
Federal student loan interest rates ranged from 4.5 percent to 7 percent for the 2019-2020 school year. Private loan interest rates may fall within this range, but they may also rise (into the mid-teens).
Meanwhile, credit card interest rates average nearly 17% and can be even higher depending on the credit score and the conditions set by your card issuer.
The Risk and Benefits of using a Credit Card to pay off Student Loans
Paying off student loans with a credit card carries risks and costs. Paying your student loans with a credit card is an option if you have private student loans, and it can provide you with more repayment flexibility. Before deciding whether this student loan repayment strategy is right for you, consider the big picture.
Earning rewards is a key advantage of using your credit card to pay off your student loans. According to Forbes, the average student has $32,731 in student loan debt, which is a considerable expense you might be putting to work for you.
Tips for Getting a Good Credit Card for Student Loans Payment
How do you get a credit card that will help you pay off your student loans? To qualify for a good credit card, you must be at least 18 years old (no issue) and have either a paying employment or a co-signer, according to the CARD Act of 2009.
You might not be eligible for a cash back rewards card right away if you just graduated. That’s OK. Take out a normal credit card to start building your credit, and make sure you pay on time and keep your balances modest. Continue to monitor your credit report (which is a good practice anyhow) and apply for a better credit card when you notice it begins to rise dramatically.
Check your Credit Score and take Steps to Establish Good Credit.
Annualreport.com offers a free copy of your FICO credit score (the benchmark credit scoring index for all credit reports). You can also receive your credit score by paying a subscription to a credit scoring service like Experian or Credit Karma.
Do your Study and look up the Card’s Terms.
That’s right, assume you’re in school again and research all of your credit card possibilities before applying for one. Pay special attention to card details such as the annual percentage rate (APR), any fees, and the credit limit. Make careful to look around for a card that best suits your needs.
Before you Apply for a Credit Card, Check your Credit Score to see where you Stand.
A credit score of 660 or above (the FICO range is 300 to 800) will almost certainly qualify you for a regular credit card. A credit score of 700 or above is required for a rewards-based card. Pay all of your invoices on time and keep your open credit accounts (loans and credit cards) to a minimum to get there.
Credit Cards to Help with Student Loan Payments
American Express Blue Cash Preferred Card
This card provides a 6% cash back reward bonus on all U.S. supermarket purchases, with a $6,000 annual spending limit on supermarket purchases. Following that, you will receive 1% cash back on all purchases over $6,000. This card also provides 6% cash back when you pay for digital media platforms such as HBO, Hulu, and Netflix.
Capital One Quicksilver Cash Rewards
This credit card gives 1.5 percent cash back on all purchases, which is a good deal considering that many cash back cards limit cash payouts to specific spending categories. You can also receive an additional $150 if you spend $500 on qualifying purchases within three months of receiving the card. You can easily apply your cash back rewards to pay off your student loan debt.
Capital One – The Savor Cash Rewards Card
The capital one card is ideal for frequent diners because it offers 4% unlimited cash back on dining and entertainment purchases – one of the highest cash back rewards percentages in the industry.
You can set recurring redemption levels of $25, $50, $100, or $200, and the money will be deposited directly into your bank account. However, keep in mind that limiting your restaurant visits may help you reduce your student loan debt while also losing weight.
Choosing the best credit card for student loans to pay off your student loans is based on a number of criteria. To begin, determine whether your student loan provider accepts credit cards and what the terms are. For American Express payments, certain merchants impose a higher cost. If that’s the case, your options are much more limited.
It’s also crucial to check with your bank to see if student loan payments will be classified as cash advances. Payments to financial institutions are occasionally coded this way, resulting in large costs that cancel out any rewards obtained.