How to pay off entire student loan with a credit card for points/cashback
July 12, 2008 7:55 AM Subscribe
I want to pay off my student loans - can I do it with an AMEX/other card to get the points and then turn around and pay off my credit card?
Sallie Mae says I can make individual minimum payments with a credit card, but that there's no way except a check or bank payment to pay off the entire amount. Can that really be true? is there a way around it?
And student loan interest is tax deductible, credit card interest is not. Fine idea (shifting debt) if you are going to just pay it off. Bad idea if you're going to pay off the card over time.
Also, make sure they don't count this as a balance transfer and charge any kind of fee for this.
posted by cjorgensen at 8:36 AM on July 12, 2008
Also, make sure they don't count this as a balance transfer and charge any kind of fee for this.
posted by cjorgensen at 8:36 AM on July 12, 2008
Response by poster: delmoi - AMEX and Citibank both told me that they treat such checks like balance transfers and don't give any points or cashback. So I think that's a dead end, unfortunately.
cjordensen - I get no tax deduction from the student loan interest because of my income, and I planned pay it off in a lump sum. Ordinarily I would just keep the loan (relatively low interest) and invest the extra cash. But with the markets sucking, I picked the single loan with the highest interest rate and want to pay it off so I feel like I'm accomplishing something with my money.
posted by elvedon at 9:21 AM on July 12, 2008
cjordensen - I get no tax deduction from the student loan interest because of my income, and I planned pay it off in a lump sum. Ordinarily I would just keep the loan (relatively low interest) and invest the extra cash. But with the markets sucking, I picked the single loan with the highest interest rate and want to pay it off so I feel like I'm accomplishing something with my money.
posted by elvedon at 9:21 AM on July 12, 2008
Response by poster: I'm thinking this might be impossible, because any of the options I can think of get treated like balance transfers.
Reps at Sallie Mae were totally incoherent and confused when discussing this with me. Is it at all possible that there's some way they will accept credit payment?
I'm hoping someone out there cleverer than me has accomplished this before.
posted by elvedon at 9:44 AM on July 12, 2008
Reps at Sallie Mae were totally incoherent and confused when discussing this with me. Is it at all possible that there's some way they will accept credit payment?
I'm hoping someone out there cleverer than me has accomplished this before.
posted by elvedon at 9:44 AM on July 12, 2008
I find it unthinkable that they would not accept money from you, in any form.
posted by jayder at 9:51 AM on July 12, 2008 [1 favorite]
posted by jayder at 9:51 AM on July 12, 2008 [1 favorite]
Sallie Mae says I can make individual minimum payments with a credit card, but that there's no way except a check or bank payment to pay off the entire amount. Can that really be true? is there a way around it?
When you buy with a credit card, the credit card company retains a 'processing fee', usually between one and five percent. This is how card companies can offer cash back/charity contributions/air miles/whatever; by giving a fraction of that processing fee back to you.
Hence, if you pay off $20,000 of loans by credit card, SLM would only get $19,800 with $200 going as the credit card fee. Then the credit card company gives you $100 worth of air miles.
Unlike retailers (who can make more by accepting credit cards than not) SLM have no reason to suck up that $200 processing fee. They want the full $20,000 - which is not an unreasonable request on their part.
AMEX and Citibank both told me that they treat [convenience] checks like balance transfers and don't give any points or cashback. So I think that's a dead end, unfortunately.
Convenience cheques don't charge the recipient a processing fee. Therefore the credit card company makes no money from which to give you cashback.
Unfortunately I think you're going to be out of luck getting cashback or points while paying off your debts - otherwise you could pay off a credit card with its own convenience cheques in an infinite loop, making 1% cashback each time, and eventually pay off the entire balance for nothing.
posted by Mike1024 at 9:53 AM on July 12, 2008
When you buy with a credit card, the credit card company retains a 'processing fee', usually between one and five percent. This is how card companies can offer cash back/charity contributions/air miles/whatever; by giving a fraction of that processing fee back to you.
Hence, if you pay off $20,000 of loans by credit card, SLM would only get $19,800 with $200 going as the credit card fee. Then the credit card company gives you $100 worth of air miles.
Unlike retailers (who can make more by accepting credit cards than not) SLM have no reason to suck up that $200 processing fee. They want the full $20,000 - which is not an unreasonable request on their part.
AMEX and Citibank both told me that they treat [convenience] checks like balance transfers and don't give any points or cashback. So I think that's a dead end, unfortunately.
Convenience cheques don't charge the recipient a processing fee. Therefore the credit card company makes no money from which to give you cashback.
Unfortunately I think you're going to be out of luck getting cashback or points while paying off your debts - otherwise you could pay off a credit card with its own convenience cheques in an infinite loop, making 1% cashback each time, and eventually pay off the entire balance for nothing.
posted by Mike1024 at 9:53 AM on July 12, 2008
My bank charges me a fee for using convenience checks because they're treated as cash advances. Careful.
posted by HotPatatta at 10:54 AM on July 12, 2008
posted by HotPatatta at 10:54 AM on July 12, 2008
I find it unthinkable that they would not accept money from you, in any form.
If you're making payments, why would they want to stop receiving significant amounts of interest from you?
Heck, even if you're not making payments, but don't default, they're making additional money off of your late fees. Do you think it really costs them thirty-five bucks to have a wage slave call you during dinner to ask about your payment?
posted by recoveringsophist at 11:38 AM on July 12, 2008
If you're making payments, why would they want to stop receiving significant amounts of interest from you?
Heck, even if you're not making payments, but don't default, they're making additional money off of your late fees. Do you think it really costs them thirty-five bucks to have a wage slave call you during dinner to ask about your payment?
posted by recoveringsophist at 11:38 AM on July 12, 2008
eeek, horrible thing to do. besides the above tax deductions, it's likely your student loan is about 8% interest rate - for life, regardless of if you miss a payment while credit cards will not only charge you a per month fee simply for having that kind of debt (processing / yadda yadda yadda fee), but also can shoot up to as much as 30% if you are late - just once. depending upon the amount you've borrowed, you could end up paying three or four times more the base worth even paying more than your minimum monthly.
not only that, but a good history of student loan payments help your payment history in the long run for other kinds of purchases like say a house, etc.
posted by eatdonuts at 6:30 PM on July 12, 2008
not only that, but a good history of student loan payments help your payment history in the long run for other kinds of purchases like say a house, etc.
posted by eatdonuts at 6:30 PM on July 12, 2008
Sounds like elvedon would pay off the card immediately, so concerns about missing payments, interest, and whatnot are unfounded.
elvedon: When you pay online, does it automatically tell you how much your bill is or is there an entry box for how much you want to pay? My credit cards have this option (radio buttons for minimum payment/full balance/different amount) but I haven't (yet) had a student loan, so I don't know if that's how it works.
Otherwise, maybe call back and try this: Ask if you can pay with a CC over the phone, but you want to pay two months at once. (Seems reasonable, maybe you'll be overseas in a jungle next month or something.) If that works, then say, well actually, can I pay X months (where X is the remaining life of the loan) at once?
posted by SuperNova at 9:12 PM on July 12, 2008
elvedon: When you pay online, does it automatically tell you how much your bill is or is there an entry box for how much you want to pay? My credit cards have this option (radio buttons for minimum payment/full balance/different amount) but I haven't (yet) had a student loan, so I don't know if that's how it works.
Otherwise, maybe call back and try this: Ask if you can pay with a CC over the phone, but you want to pay two months at once. (Seems reasonable, maybe you'll be overseas in a jungle next month or something.) If that works, then say, well actually, can I pay X months (where X is the remaining life of the loan) at once?
posted by SuperNova at 9:12 PM on July 12, 2008
This thread is closed to new comments.
posted by delmoi at 8:31 AM on July 12, 2008