Paying student loans off with credit card, how will it affect my credit?

[Neverstop]

I just recently got approved for an amex blue cash preffered card with a $10k credit limit. Originally, I only planned to use it for groceries and gas so I can get that cash back, about $300 per year. I called my student loans creditor and surprisingly they said they did accept credit cards over the phone so I have been thinking about paying them off using this card.

Right off the bat I will get the $150 bonus and they will be at 0% APR for 12 months. Currently, they are at 6% and I owe $8k. Doing this will save me about an additional $200 in interest which will only save me about $30 when claimed I'm my return for this year.

I have no problem paying off this amount by the end of the year, if I choose to, but doing this will allow me to reduce this debt to 0% APR and allow me save some money in the process. I could even extend the time of this debt into next year and put more money into my IRA.

If I choose to pay them off this way how would this look on my credit report? I got approved for this card with a $10k limit and a FICO of 720 and 684 according to capital one and discover. My limit on those is $6500 and $1400. The capital one I use once a month for a bill and i am going to pay off the discover this week and use it periodically for amazon purchases.

How will this affect my credit? It will show one account closing and another opening for the same balance.

[Choices]

It will likely lower your score because you will be using 8k of the 10k available credit on this card, or 80%, and you get a higher score if you keep it to around 30% or lower on each card.
But, if you're not taking out new loans soon, your credit score doesn't matter that much right now.

Be really, really careful that you pay off the credit card ASAP and before the interest rate skyrockets.

[Catbert]

Yep, that high of a utilization will temporary adversely impact your FICO score.  Utilization is looked at monthly so it will rebound as your utilization moves back down to 30%. 

If the net impact is only going to be $30 savings total, I'm not sure I'd do it.

[GizmoTX]

And if for some reason you cannot pay the CC in full, you've just traded 6% debt for much higher interest.

I wouldn't do it.

[Ricksun]

I'd call back and be sure to ask the student loan servicer whether they charge a fee for the credit processing.  Some will only accept credit cards if you pay the credit processing fee, generally 1-2% of the amount.

As for affecting your credit, the only issue you'll have is before you finish paying off the debt, your credit utilization rate will be slightly higher.  Once you pay it, the utilization will go back down.

Rick

[ender]

Get a lot better rewards card if you want to do this.

$150 for $10k spending is small change. The Chase Sapphire Preferred will give you over $500 for that, as they have a 50k point bonus for 4k spend in the first three months.

https://creditcards.chase.com/credit-cards/chase-sapphire-preferred

[letired]

Get a lot better rewards card if you want to do this.

$150 for $10k spending is small change. The Chase Sapphire Preferred will give you over $500 for that, as they have a 50k point bonus for 4k spend in the first three months.

https://creditcards.chase.com/credit-cards/chase-sapphire-preferred

I think they need a 0% APR period. :( But agreed, if you are going to do this, shop around for the best deal. Alternately, use the card to make your regular payments, or only repay enough to get the bonus, and then continue your regular payments?

[Neverstop]

I get the $150 for spending $1k in three months. So the 30% credit utilization is per card? If I do it I have a year at 0% APR. I can pay it off in about 5 months. Using the card will save me roughly $200 's $30 when not.

If I fail to pay them off within 12 months, say if i lose my job then i will have a bigger problems.

Another option would be to make a $2500 payment on the loans and keep the balance rolling while I apply all my payments to the loan and groceries/has.

[therethere]

As an FYI, I did a balance transfer on an American Express for near the entire credit limit to pay off my car loan on a 0% offer. Less than one week after I paid off my balance in full they closed the credit card. Jerks.

[Neverstop]

Wow, did they mention why?

[letired]

I get the $150 for spending $1k in three months. So the 30% credit utilization is per card? If I do it I have a year at 0% APR. I can pay it off in about 5 months. Using the card will save me roughly $200 's $30 when not.

If I fail to pay them off within 12 months, say if i lose my job then i will have a bigger problems.

Another option would be to make a $2500 payment on the loans and keep the balance rolling while I apply all my payments to the loan and groceries/has.

I believe the credit utilization is across your total available credit. Any loans might also figure into that, but I don't understand how those work.

[Catbert]

If you do this make sure you understand everything:  will this count as a cash advance? (cash advances usually won't help meet minimum spend); is there an initial fee for doing this? (usually a 2-5% fee on 0% interest offers)