We all have been there, enjoying the college life, partied like there is no tomorrow when everything seems bright and shiny (brighter than the orbit girl’s teeth). But no one tells you the end part, do they? Let me sum it up for you in one word – “Loans. “ You might not know which job will suit you better but the one thing that we all will have/ have is the big chunk of student debt piled right above our head, weighing us down. Forget that international trip, you might not able to save enough to treat yourself a luxurious weekend getaway.
Ask any millennial American what financial burden they want to get rid of first? You will almost hear the same name – Student loan. And why not, almost 70 percent of the college students graduate with an ample amount of student loan. The faster you will be able to get rid of the debt, the more time you will have to enjoy the life the way you want rather than sitting on your desk working those endless shifts. So why not get started right away.
Destroying your Student loan with credit card
Did you just say credit card??? Yes. I did If you are looking to pay your student loan debt while gaining back some rewards, credit card might be your option. Look at this way, an average person carries about thousands of student debt in their pockets. Paying a significant amount through your credit card while getting some percent as a cash back or travel points might not sound as weird as it looks. Your domestic and international trip might get covered and you can even get the chance to plan your trip to popular destinations like Prague, Spain, Jamaica or wherever your heart wants, practically for free.
But, yes everything comes with its fallback, and we all are familiar with the concept of ying-yang. The same is the case with credit cards, you will be facing a higher interest rate and fees. And if you fall under the category of federal student loan, then you might not be able to pay directly, that is where intermediate service comes in handy like plastiq to pay your fees. It pays your student loans on your behalf and you get credit card rewards for doing it.
For those with other student loans, you can use your regular credit card if your student loan services accept credit card payments or else plastiq is still there. One other way is to apply for a student credit card, which will be helpful to you when you apply for a loan (Almost everyone will require a loan in or before college), will help maintain a significant credit score and later you can use it to pay off your debt.
But remember to pay in full otherwise you will be paying interest on the remaining balance and out motto is to pay debt not piling it up.
What Are the Best Types of Credit Cards for Student Loan Payments?
Not all cards will benefit you, only some have the feature that makes them a good choice
Using reward cards gives you two benefits.
Earn Reward on Loan Payments
Paying your student loan will give you reward in the form of miles, points or cash back. But remember that you will only be able to enjoy these reward if you have a higher reward percentage than the fees required to pay student loan(if there is any).
Redeem Reward for Loan Payments
If you use a credit card for a prolonged period you will have some earned rewards on your card which can be later used to pay your student loan. Most reward card lets you earn points on various purchases like travel, dining, entertainment and many more.
Balance Transfer Card
Balance transfer card is good only if it has Zero Introductory fees. Because student loan has lower interest rate than a credit card, so there is no sense in using balance transfer card which has interest rate.
Here’s how to use a 0% Apr Balance Transfer card.
- Take a chunk of your student loan.
- Transfer it on your credit card as you won’t acquire interest rate for first 6 to 21 months.
- Try to pay off the whole balance during the introductory period. (Once the period is off, you can be doomed because credit card interest rate can go as high as 25%).
If you still fall behind in step three, no need to worry as you can still apply for another card with 0 Apr and transfer your balance before the standard Apr begin to avoid the interest charge.
Effect on credit score
Your credit score depends upon how well you can handle your balance. If you can pay off your balance before the generation of the statement, paying your student loan with a credit card can boost your credit score but failed to do so, can negatively affect your score.
There is no point in using a credit card if you are someone who strugglee with the credit card balance every month, our main aims is to reduce your debt not to put you in more debt. There are other ways as well to pay your student loan as early as you can. So turn back if this is not your cup of tea and look for a different option. But if you have an excellent credit card habits paying an extra chunk with reward in return hurts no one. But first, make sure to check if your student loan services allow you to pay off debt with a credit card. And last but not the least let me remind you, yes you, the fresh undergrads, brace yourself, Student loans are coming!