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College students – how do you make purchases at school? How do you pay for those hundreds of dollars worth of textbooks and tuition, fees and other expenses?
Sallie Mae recently reported that about 35% of college students who used their credit cards to pay for direct educational expenses - such as tuition and textbooks - did so when they did not have to. They had financial aid money available to pay for those educational expenses, but because many students do not have a clear understanding of how their financial aid works, they end up racking up unnecessary credit card debts.
Why Do It?
Why would college kids use money from personal credit cards to pay for school costs like this? The study provides some basic information. Many just said that they found it more convenient and hassle-free to pull out their plastic and charge the purchases, rather than try to figure out if they were eligible financial aid expenses. But educational loans like those processed through Sallie Mae typically carry very attractive and competitive interest rates that are much lower than typical credit card rates.
Do the Math
The current rate on an unsubsidized federal Stafford loan is less than 7%, for example, compared to 20% for the typical student credit card. Therefore, students using plastic are losing an average of about 13% on each transaction. That's why students may want to consider using their student loans to pay for those related eligible college purchases and expenses, so that they can graduate with less credit card debt and more financial freedom.
If You Have to Use Credit
Student credit cards can help you at school in many situations. School loans don't pay the whole cost involves in going to college. Many students need money to pay for meals and other expenses throughout their time away. If and when you do need to borrow money for these uncovered costs, it is necessary to have the right student credit card in hand.
- The Journey® Student Rewards from Capital One® comes with unlimited 1% cash back on your purchases and a bonus of up to 25% each month that you pay your bill on time. That means you can earn cash back while you build credit and are rewarded for your good habits! This card has 20.24% variable APR and no annual fee.
- The Discover it® for Students Card is another good option. You'll have 0% intro APR for 6 months on purchases and a regular APR of 13.24%-22.24% Variable with no annual fee. You also earn 5% cash back on purchases from categories like gas and restaurants and an unlimited 1% cash back on everything else.
Both of these cards give you something back for you use. If you can use educational loans to pay for your school fees, do so. If, on the other hand, you need money in your pocket, choose the right student credit card to help you.
*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.