If you're having trouble with your loan payments or you want to make the most of your credit card rewards, you may be wondering if you can pay that loan with a credit card.
The short answer: Many lenders, such as student loan servicers, mortgage lenders and auto lenders, don't accept payments by credit card. However, there may be some lenders that will let you use your credit card for a loan payment. Often, however, those will require you to pay interest or fees.
With that in mind, let’s explore how credit cards might be used to make loan payments and how to decide if it makes sense for you.
How to pay a loan with a credit card
Each lender has its own policies about whether or not it will accept credit card payments. Still, there may be a few avenues you may use to pay a loan with a credit card, such as balance transfer credit cards or credit card cash advances.
Use a balance transfer
You may be able to pay some loans using a balance transfer credit card. This can make sense if the card offers a low intro APR on balance transfers for a period of time, and you can pay all or most of the balance off by the end of that period.
Your credit card may restrict the amount you can transfer. This restriction, known as balance transfer limit, is the maximum amount of debt you're allowed to move to your card. It's important to note that this balance transfer limit may be different from, and often lower than, your overall credit limit, which is the total amount you can borrow on the card. It is also important to consider the balance transfer fee, which is usually a percentage of the transferred balance. Balance transfers usually don't earn rewards like points or miles.
Get a credit card cash advance
You may be able to receive a cash advance from your credit card account, subject to your credit card’s limits. This is considered a short-term loan. Typically, however, these types of cash advances come with a higher annual percentage rate (APR) than the purchase APR on your credit card, and interest begins to accrue immediately. These transactions typically don’t earn credit card rewards like points or miles.
How to decide if you should pay a loan with a credit card
If you're considering paying off a loan with a credit card, there are several factors you may want to consider to find the best available option:
- APR and fees: Balance transfer fees and cash advance APRs can make options more expensive, which may impact how useful they are for your needs.
- Limits: You may be limited in how much you can access with these different avenues, particularly if you carry a balance on your credit card.
- Repayment requirements: You may be required to make certain payments, such as a minimum credit card payment or a structured repayment agreement. It’s best to make sure you can fit that into your budget.
- Potential benefits: Some options may offer you the opportunity to make progress toward an introductory bonus offer, while others may be ineligible for earning credit card points or miles.
- Credit impact: These options may increase your credit utilization, which is how much of your total credit you’re using. That can have a negative impact on your credit score.
Using a credit card to make a loan payment is not always the best option and typically comes with a cost. Carefully reviewing the terms and conditions associated with this type of payment may help you understand if it’s worth it.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
