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When It Does (and Doesn’t) Make Sense to Pay Tuition With a Credit Card
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Paying tuition with a credit card may seem like a fast tack to earning points, miles and sign-up bonuses. Plus, plenty of people are doing it — in 2018, almost 21% of tuition dollars were paid electronically with credit cards, according to a 2019 report by the National Association of College and University Business Officers.
But when you consider the credit card processing fees that many colleges charge, as well as the risk of racking up expensive interest, paying college tuition with a credit card makes less sense. Here’s our guide to when it may make sense for you and when it may not, along with some frequently asked questions.
If you qualify for a credit card with a 0% introductory APR, it may make sense to pay your college tuition with that card — as long as you’re confident that you can fully pay off the balance before the intro offer ends. Otherwise, you’ll start accruing credit card interest on that tuition.
Cards with zero-interest deals typically offer 0% APR for the first 12 to 21 months; after that, the APR could jump to double digits.
If your college doesn’t charge credit card processing fees (sometimes called convenience fees), there’s no financial consequence for paying with plastic — as long as you pay off the card’s balance before the grace period ends. (Otherwise, you’ll start accruing credit card interest.)
Check with your school (likely the cashier’s or bursar’s office) to see if they charge credit card fees. You may have to call, email or ask in person, as many schools don’t publish this information online.
While many colleges charge credit card fees, some schools don’t — for example:
- Austin Community College: Students can make Visa, American Express, Mastercard and Discover credit card payments online.
- Howard University (Washington, D.C.): Students can make Visa, American Express, Mastercard and Discover credit card payments online.
- State University of New York (SUNY): Schools in the SUNY system that don’t charge credit card processing fees include the University at Albany, the University at Buffalo and Purchase College.
- University of Nevada, Las Vegas: UNLV doesn’t charge a processing fee for paying tuition with a credit card whether students pay or online or in person, according to the school’s Cashiering and Student Accounts office.
- University of Tampa: Students can make payments online or in person using Visa, Mastercard or Discover credit cards.
Even if your school charges a credit card processing fee, it may make sense to pay tuition with a credit card if the value of your credit card rewards outweighs the fees. However, credit card rewards could be diminished or erased if you have to pay interest, so only use a credit card to pay tuition if you’re confident you’ll be able to pay off your balance within one month (or before the 0% APR intro offer ends).
For example, say your credit card earns 1% cash back on all purchases and automatically matches all the cash back you earn within the first year. If you charged $10,000 in tuition to the card, you’d earn $100 cash back, plus another $100 in matching dollars for a total of $200. If your school’s credit card convenience fee is less than 2% — like the University of Houston-Clear Lake, which charges 1.45% ($145 on a $10,000 balance) — you’d still come out ahead.
Similarly, it might make sense to pay tuition with a credit card if doing so helps you earn a sign-up bonus that’s greater than the cost of the credit card convenience fees.
For example, if you have a card that offers 60,000 bonus points after you spend $4,000 within the first three months of opening the account, your points would be worth around $600 (on average, one point equals $0.01, according to ValuePenguin, LendingTree’s companion site). On a $4,000 tuition payment, the processing fee would have to be 15% to cancel out the value of the signup bonus. But college credit card convenience fees aren’t nearly that high — typically around 2% to 3%.
Again, only use a credit card if you’re confident in your ability to pay off the balance quickly. Otherwise you’ll owe interest, which will eat into the value of your bonus.
Some credit cards offer annual bonuses if you spend a certain amount on the card each year. Depending on the value of the bonus, it could make sense to put tuition on a credit card in order to help you meet this annual spending threshold.
For instance, say you had a credit card that earns 8,000 bonus points (about an $80 value) for every year you spend $10,000. If you charged $10,000 in tuition to your card in order to reach that threshold but your college charged a 2% processing fee, you’d pay $200 in fees and end up losing money. However, if you’d already spent $8,000 on the card that year and only charged $2,000 of tuition to the card in order to reach your annual threshold, you’d pay a $40 processing fee and come out about $40 ahead.
Many colleges charge credit card processing fees — accepting credit cards does cost money. And if a college can’t (or chooses not to) absorb those costs on its own, it passes them on to students in the form of credit card processing fees, or convenience fees. About 48% of colleges charge a convenience fee, according to a 2016 report by the National Association of College and University Business Officers.
Colleges’ credit card fees are generally calculated as a percentage (typically 2% to 3%) of the amount you charge on the card. On a $10,000 tuition charge, that’s $200 to $300. However, some schools charge flat fees. At Grand Valley State University in Allendale, Mich. for instance, students pay a $20 fee per transaction.
Check with your school’s billing department to ask about credit card processing fees. Here’s what a handful of colleges charge:
- Grinnell College (Grinnell, Iowa): 2.85%
- Pennsylvania State University (State College, Pa.): 2%
- Saint Joseph’s University (Philadelphia): approximately 2.99%
- University of California, Berkeley:75%
- University of Arizona (Tucson, Ariz.): 4%
It’s understandable if you can’t afford to pay a lump sum of thousands of dollars for each semester’s tuition bill, but paying tuition with a credit card is an expensive way to finance it (more on that below). If you won’t be able to pay off the entire credit card balance by the end of your monthly billing cycle (or before the intro 0% APR offer ends), don’t use a credit card to pay tuition.
Instead, ask your school about a tuition payment plan, which allows you to spread the tuition bill across multiple monthly payments. There are often enrollment fees for these plans, but they’re typically lower than you’d pay in credit card interest over a similar time frame. For instance:
- Columbia University (New York City): $45 enrollment fee for an annual payment plan with 10 payments. $25 enrollment fee for a semester payment plan with five payments.
- Reed College (Portland, Ore.): $55 enrollment fee for a semester payment plan with four, five or six payments, depending on when you enroll in the plan.
- University of Rhode Island (Kingston, R.I.): $50 enrollment fee for an annual payment plan with eight, nine or 10 payments, depending on when you enroll in the plan.
- University of Denver: $20 enrollment for a quarterly payment plan with two or three payments per quarter.
- College of William & Mary (Williamsburg, Va.): $50 enrollment fee for a semester payment plan with four payments per semester.
By comparison, if you charged $10,000 in tuition to a credit card with a 19% APR (about the average credit card APR for all new card offers, per companion site CompareCards), you’d pay $973 in interest if you paid it off in just under a year (and you’d still have to make a $1,000 monthly payment).
If you don’t fully pay off your credit card balance within one billing cycle, you’ll start accruing interest on the tuition you charge to your card. The longer you carry a balance, the more that interest will compound, making your college tuition even more expensive.
For example, if you charged $10,000 in tuition to a card that has a 19% APR and just made the minimum monthly payments (say that’s 2% of your balance, or $200), it would take around eight years to pay it off. Over that time, you’d pay back a total of $19,971 (the amount you originally borrowed plus $9,971 in interest) — almost double the amount you originally charged to the card.
Student loans are generally a cheaper alternative. There are two main types, federal and private:
- Federal student loan interest rates are set annually and are generally much lower than credit card rates. For the 2019-20 school year, the federal loan interest rate was 4.53% for undergraduate students. On a $10,000 student loan with that rate that you pay off in 10 years (the standard loan term for federal loans), you’d pay $2,454 in total interest — more than $7,000 less than you’d pay by making minimum payments on the average credit card.
- Private student loan interest rates vary depending on your credit and economic conditions but generally range from about 4% to 15% for fixed rate loans. Even with a moderately-high 12% interest rate, you’d pay $7,217 in total interest on a $10,000 loan over 10 years — still about $2,750 less than you’d pay if you just made minimum payments on the average credit card.
If money is tight and you can’t afford your monthly credit card payment, there’s generally not much you can do other than scrape together enough to cover your minimum payment or miss the payment, which will hurt your credit.
On the other hand, there are options for borrowers who are struggling to afford student loan payments, including:
- Income-driven repayment plans can lower your monthly federal student loan payments by capping your payment at 10%, 15% or 20% of your income and extend your loan term to 20 or 25 years, depending on the plan. However, you’ll end up owing more in interest on an income-driven plan than you would on the standard, 10-year federal repayment plan. Private student loans aren’t eligible for income-driven repayment plans.
- Deferment or forbearance both allow you to temporarily pause your monthly student loan payments without hurting your credit. Federal student loans and some private student loans are eligible. But whether you have federal or private loans, use deferment and forbearance sparingly, as interest will continue accruing even while you’re not making payments (except on subsidized federal student loans during deferment).
FAQ: Pay tuition with a credit card
Can you pay student loans with a credit card? Many major student loan servicers don’t let you pay student loans with a credit card. A few lenders do allow it, but they typically charge processing fees.
Are there colleges where students can’t pay tuition with a credit card? Yes. Colleges that don’t accept credit cards include Carleton College (Northfield, Minn.), Scripps College (Claremont, Calif.) and Wake Forest University (Winston-Salem, N.C.). Starting in July 2020, the University of Southern California will no longer accept credit card payments.
Can part-time students pay tuition with a credit card? Check with your school to see if it’s an option. At Boston University, for instance, part-time students are the only students who can pay tuition with a credit card.
If I’m paying college tuition with a credit card, do I need to make the payment online? Check with your school’s billing office to see what your options are. While some colleges accept credit cards in person, others schools, including the University of Arkansas (Fayetteville, Ark.) and University of Missouri (Columbia, Mo.), only accept credit cards if you pay online.
What does tuition pay for in college? Tuition covers the courses you take in college, according to the College Board. But while tuition is one of the biggest college expenses, there are additional costs including fees, books and room and board. To get a full picture of all of the expenses you’ll incur, look at the school’s cost of attendance.
What are other ways to pay off college tuition? There are many ways to pay off college tuition, including scholarships, grants, work-study, personal savings, federal or private student loans and tuition payment plans. Most students use a mix of several of these options.
Are there tuition payment plan companies? Yes. Many colleges that offer payment plans use third-party tuition payment plan companies to facilitate the plans. These companies include Nelnet Campus Commerce, CASHNet and ECSI Tuition Payment Plan by Educational Computer Systems, Inc.
What happens if you don’t pay your college tuition? Check with your college for specific details but generally, consequences may include late fees, cancelled class registration, transcript holds, ineligibility for future financial aid, withdrawal from the university and/or your account getting sent to a collections agency.
What’s a PayPath credit card fee? Some colleges use third-party companies, such as TouchNet PayPath, to process credit card payments. In this scenario, the third-party company charges the credit card processing fee.