Tuition and college expenses can be tough to manage, and you might wonder if you can pay for these things with a credit card. Perhaps you’re even thinking that paying for such large expenses with a card would be a good way to rack up rewards.
The simple answer is yes, you can buy books, pay your dorm bill, and often even pay your tuition with a credit card. But is using a credit card to pay school bills a good idea? And how would you even do it?
Using Credit Cards for Tuition Can Be Tricky
The first thing to do is confirm if your college will allow credit card payments. According to a 2016 survey of 300 colleges, about 85% accepted tuition payments by credit card. Verify if it can be done by checking the school’s website or asking someone in the bursar’s office.
If you can use a credit card to pay tuition, here some potential plastic pitfalls to keep in mind:
Add up fees
Colleges allowing you to pay tuition with a credit card may charge an additional convenience fee—57% do. The survey above revealed an average fee of 2.62%. While that might not seem like a big deal, remember how fees add up. If you’re paying a $10,000 tuition bill, you’ll also fork over an additional $262, the cost of a textbook or two. Do you really want to pay more for college than you already must?
And if your intent in using a card is to rack up credit card rewards, keep in mind that 2.62% is more than you’ll earn on most credit cards.
Consider your balance
If you don’t have the money to pay off your tuition charge right away, the interest on your unpaid balance can quickly become unmanageable. With an average credit card APR of 16.14% as of June 2021, the last thing you want to do is put yourself in a situation where you’re dealing with revolving high balances. That can quickly put you into a cycle of debt that will be tough to recover from.
Watch your credit line
Your credit card utilization ratio (or the amount of available credit you’re using) is a big factor in your credit score. Conventional wisdom says to try to keep your utilization below 30%—the lower, the better. If you have a $10,000 limit and your tuition bill is $8,500, you just used 85% of your credit line.
Investigate other options
Financial aid can be confusing at first, but working with your school to find student loan options will likely result in securing a significantly lower interest rate than you’d get on a credit card.
When Paying Tuition With a Credit Card Might Work
Now that you’ve explored some of the downsides of paying tuition with a credit card, here are a couple of circumstances when it could actually work in your favor:
Bridging the gap
If you have to come up with a small portion of your tuition, credit cards can come in handy. You can also use a card for other out-of-pocket school expenses such as a technology fee, textbooks, or your dorm meal plan. Paying off the bill at the end of the month is ideal. But if you need some wiggle room, you might consider opening a card with a 0% APR introductory rate, and following through with a payoff plan that allows you to avoid interest.
Earning travel rewards or cash back
If your school doesn’t charge a fee for putting your tuition on your credit card, this could be a good way to earn cash back or frequent flyer miles to put toward traveling home on break. But again, you’ll want to have enough to pay the bill off right away. If you’re paying interest on your credit card bill, you will offset those earnings.
Think Before You Swipe to Pay for College
The bottom line is that although you can pay tuition with a credit card if your institution allows it, it’s not the wisest option in most cases. The only exception: If you have cash on hand to pay the card balance in full, and can earn enough rewards on your spend to offset any potential convenience fees. Otherwise, using a credit card as your tuition payment method comes with too much risk, and can add extra dollars to an already-expensive college price tag.