Should you pay for college with a credit card?

by Teri Cettina

One recent day, John Morell watched his son, Blake, receive a diploma at the Berklee College of Music graduation ceremony. The elder Morell hoped that, finally, he'd be able to check off the “Pay Tuition" box on his list of parental duties.

Although Blake received a diploma, he still had to complete a final, required internship the summer after graduation. Soon, the elder Morell got an unexpected surprise: a $3,200 tuition bill for the internship.

"I only had a week before the payment deadline," Morell recalls, adding: "so I decided the fastest option was to use my credit card."

Morell is hardly alone. With rising college costs, many students and parents find themselves tempted to charge tuition expenses on their credit cards, especially with so many rewards programs available.

School administrators seem to be on board with the practice: According to a 2016 Creditcards.com survey, 97 percent of community colleges and 85 percent of four-year colleges now accept tuition payments via credit card.

Morell's story has a happy ending: Blake passed the internship, and he earned a few thousand extra points on his credit card.

Here are some of the smartest ways to score an A+ grade in weighing the pros and cons of college-related credit card payments:

1. Compare costs and rewards

Many colleges add a convenience charge whenever a credit card is used for tuition. "If you're not careful, a college's convenience charge can overshadow your 1 to 2 percent in rewards," says Karen Lee, a Certified Financial Planner™ of Atlanta-based Karen Lee & Associates.

NerdWallet personal finance columnist Liz Weston, says: "However, if you can make the math work, there are situations where it can make sense to pay modest fees to earn rewards." (Disclosure: Chase has a relationship with NerdWallet.)

When Jen Gillette signed up for an online continuing education course, the 40-year-old graphic designer from Hillsboro, Oregon, pounced at the chance to put her $400 monthly tuition on her credit card. She'd quickly meet her new credit card's introductory spending requirements and earn a reward bonus. Three months later, Gillette and her son used the rewards to fly to the Midwest to spend the winter holidays with family.

2. Be honest about your spending habits and financial health

Both Lee and Weston caution against young adult students using credit cards to pay for major college expenses like tuition or housing. Students may be able to responsibly charge smaller purchases, like personal supplies or books. However, putting big-ticket college items on credit cards is a strategy best reserved for those who are more financially stable, typically parents and older students.

3. Make sure you can pay off your card

Earning rewards on credit card tuition payments only makes sense if you don't carry a large balance for an extended period of time. "Unless you pay off your card every month, you'll incur interest," notes Lee, the financial planner. "Interest absolutely wipes out your rewards values."

4. Don't get too clever for your own good

Some students or families charge tuition to earn rewards, then move that balance to a credit card with a 0-percent introductory rate. "This really is ninja-level financing," warns Weston, the personal finance columnist. "If you're not absolutely sure you can pay off the balance in time, don't do it."

5. Remember: Credit cards aren't student loans

If you're using credit cards to pay off college costs over a long period of time, federal student loans may be a better option, says Lee. Not only do federal loans allow students to wait until they're out of school to start making payments, they may offer income-based repayment options and lower interest rates than credit cards.

6. Can't charge tuition? Consider other expenses

In Morrel's case, Berklee College charged a 2.5 percent card convenience fee, so he had previously avoided charging his son's tuition. However, Morell stockpiled card rewards by charging essentially every other college expense he could—his son's back-and-forth flights between Los Angeles and Boston, in particular. Morell also used credit cards to load funds to his son's school ID card for laundry, printing, and other costs.