Are there any downsides to paying for college tuition with a credit card? I like the idea of getting a lot of cash back.
A: According to the National Foundation for Credit Counseling, about 85% of public and private colleges accept credit cards. So, it’s definitely an option. But as we like to sometimes say, just because you can do something doesn’t mean you should do something.
Because here’s the thing: Most colleges charge a transaction fee to pay with a credit card. And that fee can run anywhere from 2% to 3% To put real numbers to it, that’s an extra $200 to $300 you’re forking over for every $10,000 in tuition. This will likely offset any rewards or cash back you’re hoping to accumulate. And of course, we would highly, highly encourage you to pay this bill off in full when it comes due – otherwise, you could start racking up devastating interest charges. Additionally, depending on your overall credit limit, charging such a significant amount could harm your credit utilization ratio.
Here’s the Simply Money Point: We’re not saying this option is a complete no-go. But you need to very carefully look at whether the benefits outweigh the costs.