How to squeeze out a few bucks.

[teek5449]

So I am finishing college in the next few weeks and while I have been able to put off paying my loans while I was in school that time has come. I have planned for this day and have been saving up the entire time while I was in school and will be able to pay off my loans in one shot without ever paying any interest at all.

My question is this. I recently hit upon the idea of using my cash back card (1% on all purchases) to make this payment. This would allow me some return but I was wondering if there is another way to really maximize what I can save in this deal. I am not exactly rich and this will really hit me hard. The money was always my rainy day fund and to see it go away will leave me with little left in the bank.

Are there any cards out there that would offer more than 1% cash back? Or is there a better way to get a little back from my savings?

Thoughts, ideas?

Thanks for taking the time to reply.

[MakeAStash]

Have you checked with your lender about this? Rarely will lenders accept payments via such cards because they'd have to pay too much in fees.

[thesimplemoneyblog]

MakeAStash makes a great point. Few lenders allow you to pay loans (student, auto, home) with a credit card. There are some services that allow you to bypass this and pay with a credit card, but most aren't worth the fees you generate in order to get your rewards. Some cards offer 2% or even 3% cash rewards (some are restricted to certain categories) but they are often capped at a certain dollar amount before dropping to 1%, and again, I'm not sure that those would even be an option.

In your situation, it would probably be better to pay most now, keep a comfortable amount in cash reserves for an emergency fund, and then pay the rest over time. You don't want to use up all of your savings at once since you cannot get funds back if you get into a hardship and need cash quick. If a catastrophe were to happen, you would likely be paying far more in interest through other methods to get cash (line of credit, credit card, etc.) than you would have paid with your student loan. Plus, from a credit reporting standpoint, it is good to have some payment history.

[bjl584]

You probably won't be able to do this unless you use a cash advance check to do so. Unfortunately the fee for taking a cash advance will outweigh the 1% cash back you will receive.

Good idea, but it won't work.

[nimisht]

I agree with some of the responses. You will have to check with both your lender and your credit card company on this issue. Be sure to compute all fees before you undertake the transaction.

On just the point of cash back percentages, there are cashback cards that will pay you higher percentages. For example, one credit card provider may pay double digit cashback but there are severe restrictions. The purchases must be made through its own internal network, etc. Though that is an extreme it is normal to find cashback cards that pay up to 5%.

[phantom]

I agree that it is very unlikely that your lender will let you pay with a credit card without a fee greater than the cash back amount. But, if by some chance you're lucky enough that you can use a credit card to pay, remember to keep your credit limit in mind. It is very likely that you owe more than your credit limit will cover. If that's the case, you might end up making a payment, paying off your card, and repeating. That could be a pain. Also, if you make multiple payments of the same amount, your credit card could flag that as suspicious, which could be more of a pain.