Using Your Credit Card to Pay for College Tuition
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You might think that using your credit card to pay for your college tuition is a smart financial move. Tuition isn’t cheap. If you’re on your university’s payment plan and use a rewards credit card to pay for your tuition each month, you could generate plenty of points or cash back.
The problem? Most colleges charge convenience fees if you want to use your credit card to pay your tuition bill. And those fees are often so high that they outweigh any points or miles you receive from your card.
Before using your cards to pay for tuition, then, study your card’s rewards programs and your college’s credit card processing fee to make sure that this move makes financial sense.
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Why you might consider paying with a credit card
College tuition is expensive, something that is showing no sign of changing. The Education Data Initiative reported in June of 2023 that the average cost of college in the United States was $36,436 a student a year. The organization also reported that the average cost of college has more than doubled in the 21st Century, growing on an annual basis by 2% during the past 10 years. It’s why so many students are scrambling to find ways to make the college experience more affordable.
You might think, then, that paying for this tuition with a credit card could pay off if you have a rewards card. Say you pay your tuition monthly, and on every due date you pay $3,000 to your university. Depending on your credit card’s rewards program, you could earn plenty of points or miles by using it to cover these payments.
Say you have the Wells Fargo Active Cash Card. This card earns 2% cash back with every purchase you make. If you charge your college tuition of $3,000 each month, you’ll earn $60 in cash back every month, equal to $720 a year.
Even with cards with a lower cash-back rate, such as the Discover it Cash Back Credit Card, you can generate plenty of rewards by charging your tuition. The Discover it card will award you only 1% cash back on your tuition payment. A $3,000 payment comes out to $30 in cash back every month, equal to $360 a year.
You can opt to receive the cash you’ve earned as a statement credit or a deposit to your bank account. You might also be able to turn it into gift cards or use it to shop at Amazon.com.
If your card earns points or miles, you can accumulate them quickly, too. The Venture Rewards Card from Capital One will give you two miles for every dollar you charge on your college tuition. For a $3,000 monthly payment, then, you’d earn 6,000 miles. If you build up enough miles, you can use them to purchase both domestic and international flights. For example, you might find a flight from Chicago to Los Angeles that costs just under 21,000 miles. You could earn more than that after charging just four months of tuition payments on your miles card.
Based on this, charging your tuition is a win, right? It makes sense to earn points, cash back, or miles while paying your tuition, right? Maybe not. That’s because of credit card convenience fees, which a growing number of colleges are charging.
VARIABLE RATE APRs 5.37% APR to 15.70% APR and FIXED RATE APRS 3.99% to 15.49%
- Lowest rates shown include 0.25 percentage point interest rate discount with auto debit payments.
- Applying online is easy - you could receive a credit result in about 10 minutes.
- Multiple repayment options from in-school payments to deferred.¹ No origination fee or prepayment penalty.
- Borrow up to 100% of school-certified expenses, whether you're online or on campus.
- Last year, students were 4x more likely to be approved with a cosigner.
Credit card convenience fees
Many colleges charge you a fee to process credit card payments, including those you make for college tuition. And these fees usually cost more than what you’d earn in rewards points, cash back, or airline miles.
When you factor in the convenience fees, the math on charging your college tuition doesn’t make as much sense.
Consider DePaul University in Chicago. The university charges a convenience fee of 2.75% for all online credit card transactions. Paying $3,000 a month in tuition would be a convenience fee of $82.50 every time you pay with your credit card.
That fee is higher than most cash-back rewards from even the more generous rewards cards, even those paying 2% cash back for all transactions.
And DePaul is hardly an exception. The Indiana University of South Bend charges an even higher convenience fee of 2.85%. And the University of Texas at El Paso increased its credit card convenience fee to 2.95% beginning in May of 2023.
If you are a student at that Texas college, then charging $3,000 in tuition each month would come with a convenience fee of $88.50 every time you make a payment. That, again, will usually outweigh any cash back, points, or miles that you’d earn from your rewards credit card.
Before signing up to use your credit cards to pay for your tuition, then, make sure to calculate how much you’ll pay in convenience fees and how much you’d earn in credit card rewards. You’ll usually find that thanks to these convenience fees, the cost of paying with a card exceeds the benefits.
An additional risk
Convenience fees aren’t the only negative that comes with paying your tuition with a card. There’s also the risk that you’ll be hit with high-interest rates if you don’t pay off your credit card balance in full each month.
Tuition charges are a big expense to put on your credit card. Even if you pay monthly and your tuition is lower than average – say you are paying $1,500 a month – that is still a big charge to add to your credit card’s balance. And it increases the odds that you won’t be able to pay off your balance in full each month.
And carrying a balance on your credit card? That’s not a smart financial move because of the high interest rates that card providers charge.
The Federal Reserve Board reported that the average interest rate on credit cards stood at 20.68% as of May 2023. That’s a high rate. And if you carry a balance on your cards, it can cause the amount that you owe to increase rapidly, even if you make your minimum required payment each month.
Say, thanks partly to the tuition you've charged, you are carrying a balance on your credit card of $2,500 at an interest rate of 18%. Say, too, that you pay a minimum of $75 monthly on the card. It will take you 47 months to pay off that $2,500 if you don’t add additional charges to your bill. You'll pay $991.80 in interest in addition to the $2,500 you owe.
That’s bad enough. But what if you pay even less each month?
Say you have the same balance on your card, but instead of paying $75 each month, you pay your minimum monthly payment, which, if your minimum balance is equal to 1% of what you owe plus interest, will start at $62.50. If you only make the minimum payment each month, it will take you 204 months to pay off your debt, and you'll pay a whopping $3,173.16 in interest during this time.
This is why it can be risky for cardholders who struggle to pay off their full monthly balance to put such a large charge on their cards. It increases the odds that you’ll continue to carry a balance. And the higher this balance is, the more likely you’ll be hit with high interest rates. If you charge your tuition each month, you are putting yourself at increased risk of running up a large unpaid balance on your card.
For example, say you continue to charge your college tuition, hoping to earn more rewards on your credit card. But because you are charging more, the balance you are carrying each month is growing.
Say the balance you are carrying, again with an interest rate of 18%, has grown to $5,000. If you boost your monthly payment on this debt to $150, you will pay $1,983.60 in interest while taking 47 months to eliminate your debt.
But if you again only pay the minimum — which with this amount of debt will start at $125 — each month, it will take you 273 months to pay off your debt. You'll also pay $6,923.09 in interest.
VARIABLE RATE APRs 5.37% APR to 15.70% APR and FIXED RATE APRS 3.99% to 15.49%
- Lowest rates shown include 0.25 percentage point interest rate discount with auto debit payments.
- Applying online is easy - you could receive a credit result in about 10 minutes.
- Multiple repayment options from in-school payments to deferred.¹ No origination fee or prepayment penalty.
- Borrow up to 100% of school-certified expenses, whether you're online or on campus.
- Last year, students were 4x more likely to be approved with a cosigner.
Any pros?
Paying your college tuition with your credit card isn’t always negative. If your university does not charge a convenience fee, paying your tuition with your card can be a good way to earn rewards and miles. The challenge lies in those fees: Most universities today charge convenience fees.
It can also make sense if you pay your balance in full on or before your credit card’s due date. That way, you won’t have to pay interest, so your card’s interest rate won’t matter.
Make sure to always have the money budgeted to cover your tuition payment each month. Never charge it and forget it. Doing that is a good way to spend thousands of dollars extra in interest.
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Writer
Dan Rafter is a freelance writer who has more than 20 years experience covering personal finance. He's written for the Chicago Tribune, Washington Post, Bankrate, CreditCards.com, Rocket Mortgage, NortonLifeLock and several others.
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