It’s usually not a good idea to pay a loan with a credit card, but it also depends on why you’re doing it. The most common reasons are:
You cannot repay the loan. In this case, you might want to pay by credit card so you don’t miss your monthly payment and get hit with charges.
The problem is that you will end up in a “rob Peter to pay Paul” situation. To pay off one debt, you take on more debt from another company. And credit cards tend to have higher interest rates than loans, which is one reason why a credit card balance can be even harder to pay off than a loan.
See if there is another option before using your credit card to cover your loan payment. For example, the lender might be able to help you if you call and ask about a hardship program.
You want to save on interest with a balance transfer credit card. Since many balance transfer credit cards have a 0% introductory APR on balance transfers, they can be a good choice for paying off loan debt.
This is the best reason to pay off a loan with a credit card. Just be sure to do the math on whether you’ll be able to pay it all back during the introductory period. Otherwise, you might end up paying more interest once this introductory period is over and your card’s APR increases.
You want to earn credit card rewards on your loan payment. It’s every rewards lover’s dream, but unfortunately, it’s next to impossible to get out of it because of the fees.
Credit cards only earn rewards on purchases, not balance transfers or cash advances. This means that the only way to earn rewards on loan repayment is to use a third-party payment service. Service fees will cost more than what you earn in rewards.
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