One interesting way to make money off the whole college experience is to invest your student loan money. Since I already bashed this idea, let’s look at something else. Another interesting topic along the same lines involves paying for college with a credit card.
Some college students cover their college expenses with a credit card. This may include: a portion of tuition, monthly rent, college textbooks, transportation, and other random charges that our schools love to give us.
Why are college expenses covered with a credit card? Until the recent Credit Card Act of 2008, a credit card was the easiest loan to get. You fill out a few forms and you receive a brand new shiny credit card in the mail a few weeks later. Most student credit cards can start off at $500 and go all the way up to a couple of thousand dollars.
Well now– Is this a half-decent idea? Is paying for college related expenses with a credit card worth it?
Not at all. The interest rates that credit cards charge are ridiculous compared to a bank or private student loan. If you want to know why using your credit card to pay for college isn’t a great idea, keep on reading…
1. High interest rates.
As just mentioned above, interest rates on credit cards suck. Honestly, after building good credit and being a customer in good standing with the credit card provider, how low will your interest rate go? Not that low at all. These high interest rates can make this process a very potent recipe for financial disaster.
(If you don’t believe me, check out this scary calculation on credit card debt.)
2. Lack of options after.
There are plenty of student loans consolidation options out there. Not as many plans for those that cover college related expenses with a credit card. Getting into high interest credit card debt in your really 20s can really set you back when it comes to reaching your financial goals.
3. Very simple to screw it all up.
It’s easy to tell yourself that you’ll only cover “college related expenses” with your credit card. After a few swipes the line will get blurry. The night out at the bar will become a college expense. The new pair of Afflicton jeans will be justified as a college related expense. You get the point. It’s very simple to screw this whole process up.
Those are my quick thoughts on paying for college expenses with a credit card. What do you guys think? Has anyone tried this? Would love to hear some success/failure stories…