Why you should not use your credit card to pay your student loan
The joy of finishing college life is often tarnished by the mountain of a student loan. There are several options for paying off your student loan, one of which is using your credit card. But before we proceed you must know that not all service providers will accept a credit card payment, especially for federal loans. It might be possible to pay private student loans using a credit card but you will also end up paying an additional fee. The only time you can use your credit card to clear your federal loan is when the loan defaults.
The drawbacks of paying student loan using a credit card
Good financial habits involve researching all your options whether for investment or loan repayment thoroughly before reaching a decision. For example, when I invested in bitcoin code, I did my research and only after being satisfied that it is a legit trading system did I part with my buck. You can check this out too in case you want to supplement your income and aid in your debt clearance.
Coming to credit card and its usage, it is foolhardy to jump from frying pan to fire for that is what paying your loan with a credit card will amount to. Credit card companies constantly change their terms and conditions and your interest rate can shoot up from zero percent to a staggeringly high 20 percent. Thus, you will end up in a greater soup than you began with. What could further hamper your financial prospects is that a high balance on your credit card will affect your credit scores and future loan prospects.
Another disadvantage is that when you make a credit card repayment you cannot deduct your student loan interest from the federal income tax refunds. You will also not be able to avail loan forgiveness and deferment.
It’s not always that bad
You can use your credit card to clear out any balance amount on your federal loan, especially when you know you will not incur any additional fees or interest because some credit cards offer attractive perks and bonuses. Another benefit is that with a credit card you will always be in the know about the remaining balance and the interest rate thereon.
Even though credit card repayment seems easy and short you must not transfer your loans to it unless you have the required finances to avoid interest. It is also dependent on the terms and conditions of the credit card. Exercise caution and exhaust all other resources before you take this option.