The Risks of Paying for College Expenses with a Credit Card

December 2022

Paying for college is expensive — and pursuing a degree almost guarantees that you’ll have to take on some amount of debt. Since many schools accept credit cards as payment for tuition and other expenses, it may be tempting to cover some of these costs with a credit card. However, it’s important to be aware of the risks and drawbacks of paying with plastic. Here are a few factors to consider before you swipe your card to pay for your education.

Take fees into account
Paying for college with a credit card will likely result in you paying more for the convenience. According to personal finance writer Dawn Papandrea, schools charge an average of 2.62% as a fee when you charge your tuition. To put that in perspective, if your tuition is $10,000, you’ll be paying nearly $300 in fees for using your credit card. That money could go towards lab fees, textbooks, dining expenses, or gasoline, so think before you swipe.

And if you think your credit card’s reward program will make the cost even out, be sure to read the fine print. Most rewards cards offer much less than the average 2.62% processing fee you’ll be paying, so the earnings won’t help you recoup the cost of using a credit card. And even if your school doesn’t charge extra to pay with plastic, you’ll still have to deal with the consequences of carrying a high balance on your card.

Think about your interest rate
Tuition isn’t cheap, and it’s unlikely that you’ll be able to pay off your card’s balance before you’re charged interest. It may even be difficult to pay it off before the next semester. And with many credit cards having APRs in the high teens, carrying a high balance could quickly compound into an unmanageable amount of debt, warns Papandrea. That said, if a credit card looks like your only option to pay for tuition, credit card and personal finance expert Meredith Hoffman suggests seeing if your university can split your tuition fee into installments. This can make managing your credit card balance more manageable — it could be easier to pay down several chunks of $2,500 rather than dealing with the accumulating interest cost of charging $10,000 all at once.

Consider your credit limit
Your tuition and educational expenses will likely take up the majority of your card’s credit limit. This can damage your credit score. When calculating your creditworthiness, the credit bureaus consider how much of your available credit you’re using. Papandrea explains that the credit bureaus favor borrowers that utilize less than 30% of their credit limit.

Therefore, a high balance can be a problem if you’re looking to take on other forms of debt, such as a car loan or mortgage. And since a lower credit score makes it difficult to secure a loan with a favorable interest rate, charging your education could have costly consequences long down the road.

If you need advice on paying for your college education, consider contacting your school’s financial aid office to learn more about your options.