Should You Use Your Credit Card To Pay Off Your Student Loans?

Chances are, you have debt from student loans. If you do, you might have thought about using your credit card to pay them off. At least then you could get rewarded for your payment or pay no interest during the introductory period. But, as US News My Money points out, this puts you in a risky situation. Not only will you possibly pay more in fees and interest, but you also surrender important protections.

Can You Transfer Student Loans To Your Credit Card?

In some cases, you might not be able to use your credit card to pay off debt from student loans. For instance, federal student loan providers don’t let borrowers pay with credit cards. Instead, you would have to use an intermediary payment service such as Plastiq, which charges you for the service. Additionally, private student loan servicers who permit credit card payments will also have extra fees.

Michael Lux, who founded The Student Loan Sherpa, a site dedicated to educating and advocating for student loan borrowers, told US News My Money, “It costs the lenders money to accept payment via credit card, so they don’t like to do it.” However, if you’re struggling to keep up with your payments, lenders might make an exception.

Several credit card providers let borrowers use balance transfer cards or convenience checks for cash advances to make payments. But convenience checks generally come with steep interest, similar to cash advances. Besides that, neither option lets you earn rewards.

Things To Consider Before Using Your Credit Card To Pay Student Loans

Using a credit card to repay student loans is not ideal for most borrowers. As mentioned earlier, you run the risk of losing essential protections and possibly paying even more for your loan due to high credit card APRs. 

A few other things to consider before making this move include:


  • Fees: If you use a third-party platform like Plastiq to pay your student loans with your card because the loan provider doesn’t take card payments, you will pay a transaction fee every time. Balance transfers and convenience checks will also charge pricey interest and costs.


  • Protections: Federal student loans (and some private loans) come with options for consolidation, deferment, forbearance, or forgiveness. But if you transfer your loan to a credit card, you can say goodbye to all of those protections. Additionally, Adam Minksy, a student loan attorney, warned, “If you have a federal student loan, you’ll lose options for death discharge, disability discharge and the right to cure default.”


  • Interest rates: Interest rates on student loans are typically more affordable than credit cards. Consider this: Federal student loans distributed after July 1, 2020, charge 2.75% interest. On the other hand, the average APR for credit cards can range from 15% to 23%.


If You Use Your Card To Pay Your Student Loans, Follow These Tips

Of course, these reasons may not be enough to dissuade some borrowers from using their cards. In that case, it’s important to learn how to minimize these extra charges as much as possible.


  • Pay the monthly minimum: If you have a missed or late payment, you could get hit with a penalty APR, which can be as much as 29.99%.


  • Don’t max out your credit card by transferring your loan: Some balance transfer credit cards limit the amount of money you can move onto it. If your loan amount exceeds the credit limit, it may not be worth it. Not only that, it can send your credit utilization rate soaring while causing your credit score to nosedive.


  • Get preapproved before getting a credit card: You should only get a credit card if it matches your spending habits and has a high chance of approval. Preapproval options are beneficial because you’ll have a better idea of your potential credit limit. When applying for a balance transfer card, it’s essential to know how high your credit limit will be so you can shop for the best offer. Additionally, preapproval helps you avoid damage to your credit since it’s only a soft inquiry.


  • Avoid annual fees: These can detract from any possible savings when you use your credit card to pay down your student loan debt. The best credit cards come with no annual fees, but if you choose one that does charge annually, make sure the money you save from using your credit card is at least the amount you pay for the annual fee.


  • Find a credit card with a competitive APR: You should always try to find a credit card with the lowest possible APR. While you might intend to pay your balance before the introductory period ends, you never know if something unexpected will happen and derail your plans.


Bottom Line

Between hefty credit card fees, the risk of losing vital borrower protections, and possibly paying more interest, it’s not recommended that you use your credit card to pay your student loans is not.


Suppose you’re in a financially difficult place right now. In that case, Lux suggests looking for a long-term solution, such as refinancing your loan, enrolling in an income-based repayment plan, or finding a side gig to supplement your income. He cautioned, “Don’t take shortcuts today and leave yourself with bigger problems in the future.”


  • Merritt, Jessica, and Jennifer Calonia. “Can You Pay Student Loans With a Credit Card?” U.S. News & World Report, U.S. News & World Report, 11 Dec. 2020,
Ian Schindler