Earning CC points + paying off SL

lbonga1 · October 2015

I came across on a discussion on the Mr. Money Mustache forums started by someone who discovered he could use a credit card to pay his student loans. For his loan provider (Great Lakes) he could call to make a one-time payment (aside from the normal monthly payment), and that extra payment could be paid by credit card. Another person mentioned that their provider only let them make the monthly payment by credit card, so I guess it depends on the company. But to really work around it, a third person said you could go to Walmart and buy Visa gift cards using a credit card, then use those gift cards to transfer money onto an Amex Bluebird card, which has bill pay capabilities. Obviously any of these options are only beneficial if you pay your credit card off in full every month. Anyway, thought this might be helpful to anyone who works credit card points!

simplyelise · October 2015

All of DH's loans are serviced by fedloan and you have to pay from a checking or savings account through ACH.

Of course if you're working points, it might be worth looking into this approach. But as a PSA, make sure you're not being charged a fee for paying by credit. I paid for an online class in college using my credit card to help with cash flow, but it charged me the extra 3% for CC processing over the charge for ACH.

als1982 · October 2015

I looked into this a few years ago for our mortgage, but the cost in time outweighed the minimal benefits IMO. Plus, I try to avoid Walmart at all costs and that's one of the few places to load Amex Bluebird and other similar cards.

bmo88 · October 2015

I will be returning to grad school in January. My undergrad loans are gone, but DH still has loans through Great Lakes. We might look into that.

For my new tuition expenses it will be $14,000 over 4 semesters. I am opening a 0% interest Capital One Quick Silver card. It gives you a $100 sign up bonus and double cash back (once when you charge and once when you repay), so 2% cash back overall. My college charges 2.75% fee for credit cards, so net I will pay .75% or $107 in fees. But once I factor in the $100 sign up it's only $7 in fees.

What's nice is that I can pay the card off easily within 15 months and I do not have to use student loans. So no origination fees and I don't have to mess with the 6.8%+ interest rate of most grad loans.

So I won't "make money," but I will save a lot once you consider the following:

15 months interest free flexibility to repay
$100 sign up bonus and double points (2%)
Only $7 in fees total
Avoid the hassle of applying for a loan and paying additional fees (1.075% origination and 6.8% interest)

hoffse · October 2015

Be careful about this. With the exception of a refinance, most banks won't let you pay one loan with another kind of loan. Back when Target was doing free CC loads on AmEx Serve, I looked into doing what you are describing with mine, and my loan providers wouldn't accept any payments made from Target redbird. I did a $1 test for multiple banks and every one of them got denied. I still did some minor manufactured spending with it, but eventually lost interest and the CC gravy train from Target got shut down soon after anyway.

When you buy prepaid Visa gift cards you usually have to pay an activation fee. To counterbalance this you need to be using the right kind of card at the right store - for example buying $200 (or even better $500) gift cards at an office supply store with an Ink card or at a grocery store when they are on a 5% rotating category bonus. In those instances the points will offset the fee. Still, you're eating a fee in your initial outlay, and it won't pay for itself until you redeem those points. People who are super into it budget those fees as part of their cash flow.

I will tell you that just from doing it through Target for free, it was still a good bit of work and I live 2 miles from a Target that was accepting CC's directly for a time. It's also kind of awkward because the cashiers learn who you are. Having to add a step where you are buying gift cards, activating them, and then unloading them is even more of a PITA. To get gift cards at the really high balances you also usually have to order them online because many stores don't carry them, so there's a delay while they are physically shipped to you and the PINs are shipped separately.

And needless to say, you need to have enough float in your cash flow or savings to cover those gift cards if the program changes or the machines are down or whatever. It happens. People who are really serious about MS'ing are often moving tens of thousands of dollars per month through multiple accounts. Every now and then you read about somebody who couldn't float that much and ran into huge problems when they couldn't unload the gift cards to pay back their CC's.

Some schools will let you pay for tuition by CC without charging you a fee. My tuition for my LLM program takes CC's, and I've been using those payments to hit spending minimums for sign up bonuses. That's way easier and (for me) a much better use of my time than doing MS'ing to get points. H and I have gotten one very cheap European trip so far by working sign up bonuses. We opened 3 cards to do it. We also had enough points left over to cover a couple nights for any of the destinations we are considering in Asia, as well as most of our domestic trips for weddings, etc. We're using my next tuition installment to work sign up bonuses for a second big trip (probably Europe or Hawaii), and again we will open only 3 cards. H and I have been tag-teaming cards, and I figure we can average 1 extremely cheap big trip per year, at least until the CC companies change the rules about how often you can get the bonuses.

I do always wait until I know I have a very expensive (budgeted) purchase coming up before opening a new card. Usually you have to hit the spending minimum within 90 days. With my LLM tuition, I have a built in $5700 "purchase" every 4 months or so until I graduate. My school lets me split the payment across multiple cards, so it's been very easy.

Believe me, if I could conveniently pay student loans by CC I would be all about it. We move more than $3K/month through loan repayments, and we'll be doing it for years. It's just a lot more work than the churners on other forums make it out to be.

hoffse · October 2015

Somewhat off-topic, but I also wanted to add... I'm super into the points thing, but one thing that really bugs me about the bloggers who write about it is they are always trying to "maximize" their points. So for instance they'll try to use the free IHG anniversary nights at one of the hotels in Bora Bora or the Maldives or wherever. OK that's great - but you still have to get to those places to do that, and the $400 flight from the mainland to the island (that you can't pay for in points) plus the $200/day you are spending in food suddenly makes your "free" night not such a great deal.

H and I have taken the approach that we're going to plan out an option or two for points trips before we ever open cards. We want to know that we have multiple destinations in mind just in case the flights don't work out when we need them, and we also want to deal with as few cards as possible. We don't just earn points and then try to figure out how to spend them later.

The reality with the points game is that you might get flights and hotels covered, but you may still need to rent a car or buy train tickets at your destination. You will absolutely still have to eat. You may want to visit attractions or join a tour group. You should really buy trip insurance if you are leaving the country. Almost all of that will come out of pocket, so we want to make sure we aren't planning a trip to an obscenely expensive destination just for the sake of "maximizing" our points. We kind of view points like monopoly money. Even if we aren't spending them in the single most efficient way possible, it doesn't matter if we are visiting a destination that is otherwise affordable and interesting to us.

I actually think one of the most efficient use of points is covering travel for social obligations - weddings, funerals, etc. Those are things most people will pay for whether they have points or not, and saving yourself a few hundred bucks per year on known, obligatory travel seems way more efficient than Bora Bora to me.

OK, off my soapbox now

formerlyGDaisy09 · October 2015

@hoffse, for now this is why we sitck to our amazon and LLBean card...because we have immediate uses for the points and it actually saves us money we would have spent anyways. That said as priorities shift, we may look into some travel card; (harkening back to our Disney discussion of about a month ago) I know several people who have knocked down the price of a disney trip by using a disney visa card regularly.

lbonga1 · October 2015

@hoffse, those are some very god points. I'll definitely have to look into it more before trying it. I'm going back to school in January and will unfortunately have to take out another loan (hopefully less than $15k), but I'm expecting my salary to jump to between two and three times what I was making when I was working full time (I'm basing this on average salary for the career I would be going into).

I've been looking into working credit card points, which is why I brought this topic up, but I don't think I'll be getting into it much until I'm finished with school and we've bought a house. I don't want to take any chances with my credit before then! I do agree, though, that points are best used for trips you would be going on anyway.

Earning CC points + paying off SL

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