Paying off student loan with 4% cash back card

nickbo

Hey,

After all this talk of the Student Loans Company interest rates going up to 4.8% my folks have agreed to lend me the money to pay the remaining £7K of my balance interest free, just to shift it.

(I am not asking for advice on whether this is the most sensible thing to do in terms of should I or shouldn't I pay it off - psychologically, we want to clear it.)

I have just been accepted for, and just received, a Capital One cash back card (4% for first 3 months) and I was thinking of paying off the debt with this, and then repaying the balance in full as soon as my statement comes in to avoid paying any interest to Capital One. SLC charge 1.5% surcharge for paying by credit card - making my £7000 debt £7105. However I would get 4% cash back on this, being £284.20, meaning I figure I would be making £179.20 by paying this off this way.

I was just wondering if anybody could see any problems with me doing this? I asked if there was a limit on the amount of cash back when I joined and was told it was uncapped, but I know with Egg Money, for example, it's £200/year. I can't see anything on their website to say it's capped but was just wondering if anybody could see any sirens blazing that I’ve overlooked!

Any help or ideas very much appreciated!

Nick

johnmoney05

I don't know they pay cashback on Balance Transfer?! Are you sure if it is only for purchases ONLY?

But as you said:-

(I am not asking for advice on whether this is the most sensible thing to do in terms of should I or shouldn't I pay it off - psychologically, we want to clear it.)

Well, suppose you know what you are doing.

wayoflife

nickbo wrote: »

Hey,
I have just been accepted for, and just received, a Capital One cash back card (4% for first 3 months) and I was thinking of paying off the debt with this, and then repaying the balance in full as soon as my statement comes in to avoid paying any interest to Capital One. SLC charge 1.5% surcharge for paying by credit card - making my £7000 debt £7105. However I would get 4% cash back on this, being £284.20, meaning I figure I would be making £179.20 by paying this off this way.
How were you thinking of paying this debt off? You cannot pay for credit with credit. The £105.00 you are mentioning is alot of money, on a debt of £7,000 even with your student loan rate of 4.8% will only acrue £28.00 interest per month, (and this will go down as you make payments) therefore that money you are paying would pay for nearly 4 months of interest. Can you pay it off in 4 months? if so then just leave it on the card.

I was just wondering if anybody could see any problems with me doing this?
The main one being the method in which you pay it off i.e. balance transfer, purchase etc? let me know and I will have a look for you
Any help or ideas very much appreciated!

Nick

Cheers,

Jai

nickbo

Thanks guys,

Johnmoney05, I am going to phone up the SLC and tell them to charge my credit card for the debt - I am not going to ask my Credit Card company to transfer the balance of my loan to it. Does this count as a purchase or a balance transfer... I'm not sure? If it's a purchase, I am entitled to the 4%, if it's a transfer I am not. It all depends on how a transfer is defined, because I assumed (and I could well be very wrong!) that it involved you contacting the credit card company and telling them to take on a balance. Any ideas on if I am right or wrong?

wayoflife - I am going to pay it off with the money my parents are lending me interest free - I am just deciding if I can get some cash back off of Capital One before doing this.

clearform

are you sure the student loans company will accept a credit card payment? This is news to me

riad_2

I heard of someone who made a payment to their Lloyds TSB Credit Card with an RBS credit card. The payment transaction appeared on the RBS bill as a cash advance with the fee, higher rate of interest and everything!

I think I am correct in thinking that paying off credit with credit is classed as a cash advance, hence exempt from cashback. The only way you will know is to ask SLC how the transaction is classed (purchase or cash)... good luck finding someone at the SLC who might actually know though.

nickbo

clearform - according to this page on the student finance website you can make additional payments using your credit or debit card.

clearform

There's a 1.5% surcharge for credit card payments. It'll also probably count as a cash advance so your credit card company will charge you an additional 2.5 or 3%. And mad interest on top of all this. This is getting very expensive!

johnmoney05

I used my Halifax Cash Back debit card to pay off credit card bill, and it didn't generate any cash back. So my guess will be the same .

Anyway, just be careful before you take any action.

nickbo

I phoned the SLC and I got one of the advisors to check with the finance department, and they said that it would go through as a purchase!

:j

So... providing this is true I might as well go ahead and pay with credit card, then pay it off instantly with money from parents, then grab the cash back in January!

Seem ok to y'all?

nickmack

nickbo wrote: »

I phoned the SLC and I got one of the advisors to check with the finance department, and they said that it would go through as a purchase!

Please do not rely on this information. The only people who can confirm how the payment will be treated is your card issuer.

It may be the case, it is treated as a purchase, but how the SLC can confirm this for every card is beyond me. It can vary between issuers and finding out it's a cash advance afterwards could be an expensive mistake.