Paying Tuition With a Credit Card

Now that September is close, some readers have asked: Can I pay my university/college tuition by credit card (and get the points)? 

The short answer is maybe, but don’t do it. There are a number of ways by which money can be drawn from your credit card for payment to a school. You can draw a cheque on the credit line, take cash out, etc. All these transactions will count as a cash advance, where you will incur interest from the date of the transaction (no 21 day grace period), and will likely incur a service fee. Further, most creditors don’t award points or cash-back on cash advances. Evidently, this is not the way to go.

Plastiq offers credit-card payment to some schools. I believe that these transactions are counted as a purchase, not a cash advance. You will have the 21 day grace period for interest, and will not incur a cash advance fee. However, Plastiq charges a 1.8%-2.5% service fee (usually the higher number) on the total amount of money paid through that service. This fee makes Plastiq an unattractive option. Here’s my reasoning: every point has a value. For example, I value 1 Aeroplan point at around 1.8c. I value SPG points at 2.1c, etc.

Say my payment over Plastiq is for $10,000. I typically find the fee for schools is 2.5%, which would be a $250 fee for this payment. Say I pay with a credit card that gives me 1.25 Aeroplan points per dollar. The transaction would give me 12,500 Aeroplan points. As each Aeroplan point is worth 1.8c, the value of those points is $225. In this transaction, I have lost $25. Now, if you would be paying your tuition from a high interest line of credit, or a similar instrument, that 21 days interest-free grace period may recover the lost amount. That is probably the only situation where it makes sense to use Plastiq.