How to Reduce Pesky Student Loan Interest (And Earn Cash Back or Big Travel!)

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Million Mile Secrets reader Debbie writes:

I have ~$7,000 in student loans at 7% interest.  I’m thinking about transferring it to a credit card so I can pay off the loan.  Do you know of a travel card that offers 0% interest for a year or more with no transfer fees?

7% is a high interest rate for a student loan, and transferring the balance to credit card with an introductory 0% interest rate could save money.  But only if you pay it all off before the promotional 0% annual percentage rate (APR) expires.  Otherwise you’ll end up paying an even higher interest rate!

Plus, most cards with an introductory 0% APR for balance transfers also charge a 3% to 5% balance transfer fee.  And that could negate much of Debbie’s savings!

But there are a couple that don’t add a balance transfer fee.  And one with an incredibly long 21-month 0% APR for purchases and balance transfers!

Unfortunately, they aren’t good for earning miles and points.  But I’ll share a workaround that could help Debbie unlock a valuable sign-up bonus!

Cards With Introductory 0% APR for Balance Transfers (and Purchases)

Here are a few 0% APR offers of longer than 1 year to consider:

1.   Chase Slate

Link:   Chase Slate

You won’t earn miles, points, or cash back with the Chase Slate card.  So there’s NO sign-up bonus.

And the Chase Slate is affected by the Chase “5/24 rule.”  So if Debbie’s opened 5+ new cards (except Chase business cards and certain other business cards) in the past 24 months, she likely won’t be approved.

With the Chase Slate, you’ll get:

• 0% APR for 15 months on purchases and balance transfers (after that 16.24%-24.99% variable APR applies)
• No balance transfer fee during the first 60 days your account is open
• No annual fee

This isn’t a good card to use overseas, because it adds a 3% foreign transaction fee.

2.   Citi Diamond Preferred

Link:   Citi Diamond Preferred

Million Mile Secrets team member Harlan recently opened a Citi Diamond Preferred to take advantage of its exceptionally long 21-month 0% introductory APR on balance transfers and purchases (after that 14.24%-24.24% APR variable applies).  He transferred a balance from his student loans for the same exact reason as Debbie!

Like the Chase Slate, the Citi Diamond Preferred has NO sign-up bonus and doesn’t earn miles, points, or cash back.  But you’ll get access to Citi purchase protection and Citi Price Rewind.

Here’s what you’ll get with the Citi Diamond Preferred:

• 0% APR for 21 months on purchases and balance transfers (after that 14.24%-24.24% APR variable applies)
• 3% balance transfer fee
• No annual fee

The Citi Diamond Preferred also adds a 3% foreign transaction fee, so avoid using it abroad!

3.   Barclaycard Ring

Link:   Barclaycard Ring Mastercard

The Barclaycard Ring doesn’t earn miles, points, or cash back either.  So again, you won’t earn a sign-up bonus.

But you’ll get:

• 0% APR for 15 months on purchases
• 0% APR for 15 months on balance transfers made within the first 45 days of account opening
• No balance transfer fees
• No annual fee

And there are NO foreign transaction fees.

How to Earn Miles, Points, or Cash Back – AND Save Money!

While each of the cards I mentioned have 0% APR periods for over a year, none of them earn rewards.  Boo!

But here are a couple of strategies to unlock a sign-up bonus and take advantage of a 0% promotional APR.

Strategy 1.   Use Plastiq and a Rewards-Earning Card With a 0% APR on Purchases

Plastiq is a service that allows you to pay almost ANY bill with a credit card for a 2.5% fee.  You can pay bills like rent or student loans, and earn miles, points, or cash back at the same time!

Paying off a student loan with Plastiq will count as a purchase, NOT a balance transfer.  So, be sure the introductory 0% APR period includes purchases.

For Debbie, the Plastiq fee would be $175 ($7,000 X 2.5%).  But that’s far less than what she’d pay in interest on her student loan at 7%.  And the value of the sign-up bonus she’d earn could far outweigh the fee!

For example, Debbie could consider the Chase Freedom Unlimited.  Here is what she would earn:

• $150 sign-up bonus (15,000 Chase Ultimate Rewards points) after spending $500 on purchases in the first 3 months of account opening
• 1.5 Chase Ultimate Rewards points per $1 on all purchases ($7,000 X 1.5 = 10,500 Chase Ultimate Rewards points or $105 cash back)

Debbie would earn $280 in cash back ($150 sign-up bonus + $25 for adding an authorized user + $105 from spending $7,000)  if she paid her $7,000 loan with the Chase Freedom Unlimited card.  After paying the Plastiq fee ($175), that’s $105 in her pocket ($280 – $175)!

And that’s NOT including the interest she wouldn’t have to pay!

Strategy 2.   Get 2 Cards to Earn the Most Rewards

Most cards that offer a 0% introductory APR have a low or NO sign-up bonus.  But cards with a heftier sign-up bonus (and minimum spending requirement), like the Chase Sapphire Preferred Card, Citi Prestige, or Capital One Venture, don’t come with a promotional 0% APR period.

Because Debbie has $7,000 to spend (which could unlock a big sign-up bonus), she could try this strategy:

• Sign-up for a rewards-earning card AND a card like the Chase Slate, Citi Diamond Preferred, or Barclaycard Ring Mastercard at the same time
• Use the rewards-earning card to pay off a student loan using Plastiq (and at the same time, meet the card’s minimum spending requirement)
• Then, transfer the balance from the rewards-earning card to the 0% balance transfer APR card

Note:   You’ll end up with 2 credit pulls if you use this technique.  So you’ll likely have a larger (temporary) dip in your credit score.

For example, Debbie could consider opening a Chase Sapphire Preferred card.  She’d earn 50,000 Chase Ultimate Rewards points after spending $4,000 on purchases in the first 3 months of account opening.

If she used the Chase Sapphire Preferred to pay her student loan through Plastiq, she’d earn a total of 57,000 Chase Ultimate Rewards points.  That’s worth $570 in cash back, or ~$713 in travel booked through the Chase Travel Portal, or potentially much more when you transfer points to airline and hotel partners!

After paying the $175 Plastiq fee, Debbie would still be ahead by $395 if she redeems her points for cash back ($570 earned from card – $175 Plastiq fee).  Or make a profit of ~$538 (~$713 in travel from card – $175 Plastiq fee) if she uses points for travel through the Chase Travel Portal.

And again, that doesn’t include how much she’ll save on student loan interest!

Once Debbie pays her student loan through Plastiq, she can transfer the balance from her Chase Sapphire Preferred card to a Citi Diamond Preferred, or Barclaycard Ring MasterCard she’s opened at the same time.  And she’ll pay 0% in interest for the promotional term on the card!

Important Note:   You usually can NOT take advantage of promotional APRs when you transfer balances between cards issued by the same bank.  So, for example, Debbie would NOT be allowed to transfer a balance from the Chase Sapphire Preferred to the Chase Slate.

Caution!  There Are Pitfalls

Be sure that you’ll be able to pay off the balance transfer in full before the 0% APR expires.  Otherwise, you will end up paying 2 to 3 times your normal interest rate.

If you have federal student loans, they come with a wide range of protections and benefits.  When you transfer a federal loan to a credit card, you lose the ability to defer your payments for school or economic hardship.

Moving student loan debt to a credit card will increase your revolving debt, and can temporarily drop your credit score.  But it is only one factor for maintaining good credit.

Bottom Line

There are a number of credit cards that offer a promotional 0% APR on purchases and balance transfers for a specified time, like the Chase Slate or Citi Diamond Preferred cards.  Transferring higher interest student loans to these cards could save you big money, and reduce your stress.

But usually, cards with introductory 0% APRs have small or NO sign-up bonuses.  And some don’t even earn miles, points, or cash back!

By using Plastiq, a bill payment service, you could potentially unlock a big sign-up bonus and make a profit.  Even when you take into account Plastiq’s 2.5% fee for payments.

And it’s very important to pay attention to balance transfer fees, when the introductory APR expires, and the federal protections you could be forfeiting.

What have you done to try to alleviate your student loan debt?