SHOULD YOU USE A CREDIT CARD TO PAY COLLEGE AND UNIVERSITY TUITION?

BEWARE OF CONVENIENCE FEESBeware of Fees

The majority of colleges have begun to protect themselves against the fees that card processors charge them by requiring parents or students to pay an additional convenience fee averaging around 2.625% for using a credit card. Do the math! That translates to $262.00 for every $10,000 of tuition in addition to interest accruing from the day of purchase or the statement due date depending on the particular credit card agreement you have.Reward Points

Not a lot of people pay college tuition bills with a credit card. But some do…whether for convenience or to get those nice rewards points.

Colleges didn’t always charge a convenience fee for people who pay their bills with credit cards, but in recent years the number of families using credit cards started to increase up to a point where colleges say they can no longer afford to absorb the transaction cost. charged them by the credit card companies.

Officials at most schools discourage the practice of using credit cards for college expenses. The colleges and universities make no profit from the transaction fees they charge.  A third-party vendor processes credit card payments when made through the institution’s online payment program, and those vendors charge an average 2.62 percent fee for its use.

Institutions discourage the use of credit cards for these types of payments because the terms of credit card companies are usually less favorable to borrowers than traditional student loans.  Absorbing the credit card fees can run into hundreds of dollars per student and colleges and universities across the nation are under pressure to keep costs down.

Credit Card Companies
Credit Card Companies

Most credit card companies will add the amount charged on the the first statement following issuing of the credit and will begin collection actions quickly if payments are not paid, thus adding more pressure to the students to make monthly payments and getting  them caught in the credit card trap.

Community colleges are the most fee-friendly. Out of the 100 largest community colleges surveyed, 97 percent accept credit cards for tuition payment and only 8 percent of them charge convenience fees. By contrast, 93 percent of public universities and 77 percent of private institutions that accept credit cards charge convenience fees.

Survey
Survey

CreditCards.com, based in Austin, Texas, conducted a survey in 2014 and another one earlier this year  in 2016 which found the number of colleges accepting credit cards fell from 260 to 255. However, the number of schools charging a convenience fee went up from 142 in 2014 to 145 this year.

“It doesn’t surprise me more schools are charging the fees simply because they don’t want to eat the cost of those credit card transactions,” said Matt Schulz, senior industry analyst at CreditCards.com. “The number of schools not accepting credit cards probably stopped doing so because the population of students using cards was not high enough to make it worth while.”avg-tuition-and-fee

He said the majority of community colleges don’t charge a fee for credit card use because community college doesn’t cost nearly as much as a big university — public or private.

“The lower the tuition cost the more likely someone is to consider putting the cost on a credit card,” he said. “There is a big difference between putting $1,500 on a credit card than $15,000.”

Private student loan lender, Sallie Mae, released a report earlier this year showing the percentage of parents using credit cards to pay for college runs 2 percent to 3 percent. However a higher percentage of students use credit cards to pay college bills at 3 percent to 5 percent.

Ben Woolsey, president and general manager of CreditCardForum.com. based in Austin, Texas, said retailers have always had to bear transaction fees for credit card purchases and they pass it on to consumers by increasing costs.

“Other entities also accept credit cards like state and local government,” Mr. Woolsey said. “Even the federal government allows taxpayers to use credit cards to pay taxes, but they also charge the consumer a convenience fee so they do not have to absorb that interchange fee.”

“All of it is colleges protecting their bottom lines,” he said. “They are trying to make a profit and they don’t want to accept less than 100 percent of the tuition they are owed. My guess is people who use credit cards to pay tuition already have the money in the bank, but they want to earn rewards. This removes the incentive to do so because the convenience fee is higher than any rewards they earn”.get-help-with-debt

Overall, credit cards are a terrible way to finance long-term debt without having the ability to repay on the first monthly bill.  Tuition is a long-term debt and student loans are probably a better way to pay for college in the long run.

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