Should I use card for things like Tuition?
One of the biggest chances in the world of colleges and universities over the past fifteen years is the move towards accepting credit cards for tuition. Some universities have begun accepting them due to student demand, while others have had enough of the fees that come with accepting credit cards and have cut off their usage. Let’s take a closer look at the plusses and minuses of using credit cards to pay for your college tuition.
The big thing to look at here is interest rates. While you need almost perfect credit to get one, there are cards out there that have interest rates lower than the rates on many student loans, even federal student loans like Stafford and Perkins loans. While the interest rates on student loans are always in flux, the current rates are between five and six percent, although if you consolidate your loans you can actually lock in an ever lower rate once you finish school. If mom and dad have a card that has a fixed rate or, at the very least, a very low variable rate, you can pay your tuition on your credit card and save some serious bucks over what you would pay in student loans.
The other major advantage of paying your tuition with a credit card is your chance to rake in the rewards. If you have a low interest card that you’ve decided to use for your tuition, chances are, you’ll be able to meet your reward criteria very quickly depending on how much your tuition is. If you child is attending an Ivy League school, you can expect a free flight every semester, which can really add up if your interest rate is low enough. Other rewards can be enjoyed, as well if you pay your tuition with a credit card. Just make sure it makes financial sense in the long run.
There are negatives, however, to using plastic to pay for tuition. Many universities in recent years that once accepted plastic to pay for things like tuition have stopped, saying that the fees attached to every transaction is eating up too much profit.
You also need to watch for your credit card company raising rates. Most card companies decide to raise your interest rates by enclosing a white slip of paper in with your monthly bill. Most folks ignore this slip of paper and toss it in the trash, but it can mean the difference in a little interest and a lot. If you are carrying a $30,000 balance on your card and your card company raises your rates from 3 percent to 8 percent, the amount of interest you would have to pay over the life of your balance is incredible. If your card decides to raise rates, the only real option you would have would be to send your card company a written letter canceling your card within 30 days of you getting that notification in the mail. This is the only way to lock in your old rate permanently. You will lose the ability to use your card, but you will protect yourself from the higher interest rate.
One final consideration is that most folks, even if they have a card that has a low enough interest rate to pay for tuition, don’t have a credit limit that would allow for such a huge transaction. If you can’t take care of it all on your card, there isn’t much of a point in only doing half.