Some of my friends and Travel with Grant readers (I hope those two groups overlap…) ask me some good questions about credit cards and I thought I would share my thoughts with everyone.

Question 1: Should I use a Credit Card to Pay for College Tuition?

First off, college tuition in the above question could be replaced with any large purchase (car down payment, new furniture/appliances, property tax, etc.).  Ultimately it comes down to whether the merchant charges you a “convenience fee” if you use a credit card to pay.  If the answer is no, then go ahead and use a credit card to pay the merchant.  If the answer is yes, then you have to think a little harder.  Reasons I would pay a “convenience fee”:

• If the merchant charges 1% or less for using credit cards
• If I am trying to meet a new credit card’s minimum spending requirement
• If I am trying to reach a spending bonus (for a free night, bonus miles, bonus points, or elite status)

If the answer to the above questions is no, then it is probably not worth it to pay with your credit card.  For example, my brother goes to UCLA and they take credit cards but charge a 2.75% “convenience fee” for all payments.  If his tuition is $5,000 a quarter, he would end up paying $137.50 in fees ($5,000 x 2.75% = $137.50).  If $137.50 in fees is worth more than the sign up bonus of the credit card (like 50,000 Chase Ultimate Reward Points worth $500+), then he should do it.  If he is using an old credit card to earn more miles/points, he will earn 5,138 miles/points (5,000 + 138 = 5,138), but it will cost him $137.50, which comes out to 2.68 cents per mile/point.  At this point, he has to decide if he wants to “buy” those miles/points for 2.68 cents apiece.  Most miles/points are not worth that much, so he might be better off paying with an ACH bank transfer or personal check.

Question 2: Which Credit Card Should I use for a Balance Transfer?

This is really an easy question.  If you have balance transfer questions, reward/travel credit cards are not for you (right now).  Reward/travel credit cards often have the highest interest rates (20%+ if not higher) and there is no way you will ever come out ahead if you carry a credit card balance from month to month.  My advice is to open a Chase Slate credit card because it offers 0% interest on balance transfers and purchases for 15 months.  This is one of the few credit cards that does not have any balance transfer fees if you transfer balance within the first 60 days of card membership.  This credit card will literally save you hundreds (maybe thousands) of dollars in interest over the months.  But please, if you get this card, do not make any more purchases.  Start working on paying off your balance.  Slow and steady is the way to go.

If you have any questions, please leave a comment below.  Happy holidays everyone!