How to use Credit Card for Student Loans?

An education loan is a big responsibility that every student takes on to achieve their dream, even before starting the journey. Every student is looking for ways to pay off their education loan efficiently while saving some money. Many students often use credit for student loans which could result in complicated financial stress. However, they can be avoided by doing research so, we included everything that you must consider before swiping that credit card for the repayment. 

What is a Credit Card?

A credit card is a financial tool that allows a person to borrow money from the bank to pay bills and purchase new things. You can pay back the money later or even convert it to an EMI. This money-borrowing process is straightforward. This doesn’t require any additional paperwork and helps many people manage their finances.

What is a Credit Card Student Loan?

A credit card student loan isn’t any official term, it refers to the practice of using a credit card to manage or pay off student loans. There are many ways to use credit cards for the loan payment and it is often used for convenience, rewards, and cashback. 

Some Popular Student Credit Cards

There can be lots of moneylenders and banks offering different credit card products. However, some names top the list of credit cards for student loans. They are well known and provide various cashback and offers on every transaction:

• 
  HDFC Bank Forex Plus Card
• 
  Zolve Credit Card
• 
  Discover It Student Cash Back
• 
  HDFC Bank ISIC Student Forex Plus Chip Card
• 
  ICIC Bank Student Forex Prepaid Card
• 
  IDFC Wow Credit Card

Want to apply for the Forex Card? Click here!

Benefits of Credit Card

Credit cards are a boon only if used within limits; otherwise, they can lead to more debt. So, here are the benefits and reasons to bring the positive aspect to the factors often considered negative.

Credit Limit:

Most student credit cards come with an INR 15,000 credit limit to ensure that students don’t overspend and learn to manage their expenses.

Credit Validity:

Student credit card has five years of validity which is longer than regular credit cards. 

Wavier of Fees:

Annual fees or the joining charges are either not applicable or are nominal for the student credit card.

Special Deals & Rewards:

Bonus points and cashback are often provided when a certain amount of money is spent using the credit card.

Pre-Checks Before Getting a Credit Card

If you are getting a credit card for student loans then give the following pre-checks:

Allowed Payments:

You might apply for a credit card for the student loan however, you should check the allowed transactions. Many credit cards don’t allow the repayment of the loans and you require a third party to make the repayment. The third party charges a fee which makes this option costlier.

Annual Percentage Rate (APR) Offers:

When you repay your student loan they charge a processing fee, administrative fee, and other fees related to the student loan. Hence, check does your credit card provides any APR offers while making the loan payment. This will help you save a good amount during the repayment. 

International Cards:

Many international banks allow students to apply for the credit card while they are still in India. You apply for these international credit cards and save the unnecessary transaction charges while you stay abroad. Remember, to check all the related documents before acknowledging them. 

Annual Fee:

Credit cards are charged with an annual fee therefore, check all the related fees before applying for the credit card. You can use this factor to choose the right credit card which offers the best rewards and benefits. 

No-Foreign Transaction Fees:

Always ask for the no-foreign transaction fees on your credit card otherwise, the bank will charge a higher interest rate on every transaction.

How to Get Credit Card Student Loans?

Getting a credit card as an Indian student studying abroad can be a great way to manage your finances. Here are steps you can follow to get your credit card:

Research Credit Card:

You should research the requirements of the documents and terms related to different credit cards. This will help you come up with the best credit card that offers the best benefits to the students. 

Check Your Eligibility:

Before you start preparing the credit card ensure that you have checked the documents required for the credit card. Thus, prepare a checklist before applying for the card this will help you save time and effort. 

Choose the Right Card:

While applying for the card ensure that it allows the credit card student loan at low interest rates, no annual fees, or offers rewards and cash-back options. All these offers will help you build a strong credit history that will help you get financial assistance in the future. 

Provide Documents:

When you have chosen you right card, apply for the credit card by submitting your documents like passport, student visa, admission letter from your university, proof of residence in the foreign country, and financial proof (bank statements, income from your family, etc.).

Alternative Ways To Use Credit Card for Student Loans

Many times you get a credit card that offers the best rewards and features however, your loan servicer doesn’t allow you to make payments using a credit card. In this case, you can use the following alternative means to pay your student loan EMI. 

Third-Party Service:

You can use third-party payment services like Plastiq to use your credit card to pay the student loans. Even though the loan servicer doesn’t accept the card you can repay using the third party. Every third party has its own charges. Plastiq charges a fee of around 2.85% for the service, thus, calculate before making the payment.

Convenience Checks:

If you are using a credit card for the first time and want to avoid third-party services then you can use the convenience checks. This is the same as the personal checks but, here instead of the saving amount you are using the credit card amount. You can write it directly to the person or company you want to pay like your student loan servicer. But, check the interest rate as it is higher around 29% and immediately after withdrawing the amount. 

Flat Rate Cards:

You can also use the Flat rate cards to repay the student loan which offers 1% cashback on every transaction that you make. However, ensure that the amount you are paying to the student loan using the third party doesn’t charge high fees which makes the cashback and rewards negligible. 

Balance Transfer Offers:

If you have a bigger amount left on your student loan then you can consider transferring the loan amount to the credit card. This will charge you 0%APR. However, watch out that the balance transfer fee and the interest rate are lower as compared to the student loan. 

Common Mistakes While Using Credit Card Student Loans

While using credit card student loans many students make some common mistakes that affect their financial stability in the long run. So, avoid making these mistakes while using credit for student loans:

Interest Rates:

When you use the credit card to pay your student loan the interest rate charged by the credit card is higher. Thus, check the charged interest rate on the amount withdrawn by the credit card to save yourself from the higher interest rate. 

Overlooking Rewards Vs Costs:

Students often focus on the rewards rather than the third-party charges and other charges applied while using the credit card for student loans. Therefore, ensure that you are considering all factors before using the credit card for the repayment.

Government Benefits:

When you transfer your student loan amount on the credit card you miss out on the government benefits it offers on the student loan repayment. Therefore, decide after weighing all the benefits and losses. 

Conclusion

According to the Education Data Initiative, the average student loan debt balance could be an average of USD 40,114. So, if you use a credit card to repay this amount and earn around 1 percent of the cashback then it can fill your pockets with a good amount. Yet, all the options and parameters like the interest rate, transaction fees, and repayment tenure need to be evaluated before making the decision. So, create a checklist and make the right decision. If you want any help with the education loan but, are stuck take help from GyanDhan to make the right decision.

Also Read:

• 
  Cheapest Education Loan
• 
  How to Plan Abroad Education Repayment?
• 
  Government Education Loan for Students
• 
  Public Sector Education Loans
• 
  Education Loan Comparision

Frequently Asked Questions