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When it makes sense to charge kids' school, day care costs

Paying with credit could rack up points fast, but oftentimes there's a fee involved

By  |  Published: August 25, 2017

Summer Hull
Personal Finance Writer
Summer Hull writes the weekly "Get to the Points" column for CreditCards.com

Get to the Points

If your child is one of the millions in America enrolled in day care, preschool, private school or college, then the back-to-school season not only means having to purchase new shoes, notebooks and backpacks, but also potentially spending thousands of dollars for their actual care and education.

The average cost for a year of day care in the United States is about $9,589 and the average cost for a year’s worth of college, including tuition, fees and board, is more than $21,000. Those are tough numbers to swallow, so it is only natural that those who like to maximize their credit card rewards will wonder if paying those huge bills can at least earn them some airline miles or credit card points by swiping a card.

The cost of paying for school with a rewards credit card
The good news is the answer is often yes, but the not-so-good news is that paying for school with a credit card isn’t always worth it as the cost to pay with the card can sometimes outweigh the rewards you can earn. While some schools and day cares allow you to make payments with a credit card fee-free, the majority of them assess a fee that often ranges between 2 to 3 percent of the total amount charged. 

To give an idea of the variability of what various schools charge for paying with a credit card, of the three colleges I attended, the local community college charges no fee, the University of Texas charges a 2.3 percent fee and New York University hasn’t accepted credit cards for tuition payments since 2010.

In 2016, CreditCards.com surveyed the 300 largest public, private and community colleges and universities. The survey found  57 percent of colleges charge fees for card payments, with an average credit card processing fee of 2.62 percent.

This ever-changing credit card payment landscape extends to day cares and preschools as well. To use another personal example, until this year my 2-year-old’s preschool would accept lump sum credit card payments for no fee, but now there is a 2.85 percent fee for credit card payments made through the popular FACTS online payment system utilized by many private schools and preschools.

While a credit card fee of 2.5 to 2.75 percent is now common in many schools, some such as Penn State buck the trend at just 1.5 percent, and some, including Florida A&M University, just charge a modest flat fee, which can often be worth paying.

Do the rewards you earn outweigh the fee?
In terms of whether it is still worth paying for school with a credit card if there is a fee, you simply must do the math. Compare how much the fee will cost against how much the rewards you earn are conservatively worth. If you are paying with a traditional airline credit card that earns 1 mile per dollar spent, then a 2.75 percent fee isn’t worth it.

However, if you paid with a credit card such as the Chase United MileagePlus Explorer * card, which earns 1.5 United miles per dollar charged on non-United purchases, and your school only charges a 1.5 percent fee to pay with a card, then you are essentially buying those airline miles at 1 cent per mile, which could be worth it for if you can redeem them at a greater value.

Hitting credit card spending requirements with tuition payments
There is one case in which it might be worth it to pay a large bill, such as a tuition payment, with a rewards-earning credit card, even if there is a fee: when you are trying to meet a minimum spending requirement to trigger a big sign-up bonus. For example, the Citi Prestige card * currently has a 75,000-point sign-up bonus, but only if you spend $7,500 on the card in the first three months.

If you normally couldn’t spend that amount in that short time frame, but could hit that minimum if you decided to charge a $7,500 tuition payment with a 2.5 percent fee, you would pay $187.50 in fees for the charge. That is a lot of money just to use a credit card, but if that charge then triggered a 75,000-point sign-up bonus worth close to $1,000, then you could still come out ahead, assuming you pay the bill right away and don’t start racking up interest.

Big school payments do offer an opportunity to use your rewards earning credit card to earn miles or points, but just be sure you do the math first to ensure you come out ahead.

* The content on this page is accurate as of the posting date. Please see the bank’s website for the most current version of card offers.

See related: 9 rewards card sign-up bonus mistakes, 8 creative ways to build credit card rewards points quickly

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Updated: 09-21-2017

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