Pay student loans or 529 plans with a credit card!

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Gift of College gift cards are now available nationwide. This is great news for those saving for college or paying off college. Thanks to this new development, it is now possible to use a rewards-earning credit card to pay student loans or to save for college. gift-of-college-gift-card

In Store Availability

As of November 7th 2016, Gift of College gift cards were expected to be available nationwide at Toys R Us and Babies R Us stores. I visited one of each on November 7th and found a huge supply of these gift cards near the Toys R Us checkout counters. Babies R Us didn’t have the cards and the store manager hadn’t heard of them. My point? Depending on where you shop you may or may not have ready access to these cards.

gift-of-college-gift-card-on-rack

Fees as low as 1.19%

Each card is loadable up to $500. If you load exactly $500 (which I recommend), then the fee is only 1.19% of the card’s value. Many credit cards today offer significantly better than 1.19% rewards, so it’s easy to come out ahead this way!

Credit accepted?

It’s possible that some stores won’t allow credit card payments for these cards, but I had no trouble at my local Toys R Us. There also didn’t appear to be any limit to how many could be purchased at once.

Gift cards accepted?

It used to be possible to buy gift cards at Toys R Us with gift cards. This was great for those who bought Toys R Us gift cards at a discount. Unfortunately, they have since limited some types of gift card purchases.

When I asked if credit cards were accepted, the cashier I bought the Gift of College gift cards from told me that credit cards were fine, but not Toys R Us gift cards. If I had one on hand I would have tested that theory since it’s rare for store employees to know what works and what doesn’t. Still, my bet is that it won’t work.

Meanwhile, I’m sure that Amex, MasterCard, and Visa gift cards would work fine, but I didn’t test those either.

The online option: Fees as low as 3%

If you don’t have a Toys or Babies R Us store nearby, or you find they’re not stocked with gift cards, another option is to buy Gift of College gift cards online directly from Gift of College. Online, they currently limit each gift card to $200 max. That results in a fee of just under 3%.

fund college savings

In my experience, Gift of College gift cards purchased online code as charitable donations. If you have a credit card that offers a category bonus for charitable donations, then it may be worth paying more in fees in order to earn higher rewards.  NOTE: While these purchases are coded by the Visa network as charitable donations, that does not mean that you can claim these as charitable donations on your taxes!

Will this work with your student loan or college savings plan?

gift-of-college-redeemable-forThe gift card itself claims that it works with:

  • Any existing 529 College Savings Plan
  • Any new 529 College Savings Plan
  • Any existing student loan payments

But, personally, I wouldn’t risk buying these gift cards until I was certain. Fortunately, it’s easy to check whether your loan or 529 plan is supported. Simply create a free Gift of College account and attempt to add your loan or savings plan. If you find your loan or plan and can add it successfully to your account, you should be good to go.

gift-of-college-student-loans

Applying the funds

After buying these gift cards, you can apply the funds to your loan or savings plan as follows:

  1. Log into your Gift of College account
  2. Click “Redeem Gift Card
  3. Enter the gift card number and 4 digit PIN

How long does it take?

In my experience, it took 7 to 10 days after redeeming Gift of College gift cards for the funds to appear in my son’s account. With my first gift card redemption, funds showed up in my son’s 529 plan 10 days later. On two subsequent redemptions, funds showed up 7 days later.

Gift of College’s FAQ states that funds can take up to 14 days before showing up on plan statements.

Which credit cards are worth using?

  • Any new card that requires minimum spend in order to earn a big signup bonus.
  • Any card in which you want to earn a big spend bonus.
  • Any card that earns better than 1.19% value in rewards, such as:
    • Discover It Miles: First year cash back is doubled, making it effectively a 3% cash back card for the first year
    • Chase Freedom Unlimited: Earns 1.5 Ultimate Rewards points per dollar. Pair with the Sapphire Reserve to make points more valuable.
    • Amex Everyday Preferred which earns a 50% bonus in points each billing cycle in which it is used 30 times or more.
    • Citi Double Cash: 2% cash back
    • Barclaycard Arrival Plus: 2X miles
  • Any card that offers a bonus for charitable spend (when ordering gift cards online) and results in better than 3% rewards:
    • US Bank FlexPerks Visa: 3X points for charitable contributions
    • US Bank Cash+: Charity is usually an optional 5% cash back category

Please find most of the cards mentioned above on my Best Credit Card Offers page.

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