Should You Pay Your College Tuition With a Credit Card?

Students in workshop

Many credit cards offer great perks to the cardholders who use them. In addition to fraud protection and the ability to buy now and pay off your purchase later (with no interest, if you pay the balance before the monthly billing cycle closes), many credit cards can help stretch every dollar you spend by 1% to 3% thanks to points programs and cashback rewards.

Spending large amounts means earning more rewards. So when it comes to paying college tuition, which can run you thousands of dollars per semester, it’s only natural to ask: should you charge it to your credit card?

The short answer: OMG no, don’t do it! Here's why...

Most Colleges Charge a Convenience Fee

Using a credit card could actually increase your college costs. Many universities charge an average convenience fee of 2.75% to accept your tuition money via a credit card charge. If a semester’s tuition runs you $10,000, that could mean paying an additional $275 just to pay with a credit card.

And no, whatever rewards you earn likely won’t make up for that loss. Most cashback cards offer 1% back on purchases. That means you’d only earn $100 worth of cashback on a $10,000 charge.

Most schools don’t take a cut of that money. The fee covers their costs of working with a payment processor to accept your payment, and the school passes that fee on to you if you choose to put your college tuition on a credit card.

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Credit Card Interest Isn’t Worth It

Putting college tuition on a credit card means risking the high interest rate charges that come with most credit cards. The average APR on a cashback credit card is 20.90%. Travel reward cards are a little better with an average APR of 15.99%, but not much.

If you need to pay off your college tuition over time, paying with a credit card will cost you exponentially more than borrowing money through a federal student loan. Both Direct Subsidized and Unsubsidized loans for undergrads come with an interest rate of just 3.76%.

Your Credit Score Will Take a Hit

Another reason to go with a student loan over putting college tuition on a credit card? A student loan is an installment loan. A credit card is a revolving line of credit. And when it comes to your credit score, this distinction matters.

Credit reporting agencies look at those two types of credit differently. Big installment loans like mortgages and student debt aren’t necessarily “bad” if you steadily work to pay down the balance. Racking up and holding a big balance on your credit card, however, will damage your score.

That’s because your credit utilization ratio will be too high if you put your college tuition on a credit card. This ratio is the amount of credit you have versus the amount you use. You should always aim to keep that number at 30% or below on revolving lines of credit.