Paying Off Student Loans With Credit Card Rewards!

Paying Off Student Loans With Credit Card Rewards!

Disclaimer: Credit cards can be a dangerous tool that helps dig you into massive debt at a high interest rate. I NEVER recommend anyone using the below strategies who has been in massive credit card debt AND who is NOT on a budget plan. It took us 3 years running a cash-only budget before we could dip our toes into credit cards, and I recommend anyone starting out take at least 1 YEAR on a cash-only budget to build good money habits before attempting to get credit card rewards.

Paying Off Over $3,000 In Student Loans With Credit Card Rewards!

Yup, you read that right. I’m getting into debt to get out of debt!

Ok, not exactly. But we ARE using credit card bonuses to help us tackle the last remaining debt we have (outside the mortgage).

A little while back, the Citi Thankyou Premier card was offering a generous 50,000 point bonus! Since we’ve decided that paying to travel is stupid, we naturally signed up for two cards to get ourselves another 100,000 points to add to our collection for future travel plans.

But something I read about Thankyou bonus points caught my eye. They have an option that allows you to convert points into a check that Citi will send to your Student Loan servicer. The points are worth $.01 a piece, which means the bonus is worth $500 cash toward your student loans!

How It Works

We signed up for two cards so we could each get the bonus. There is a minimum spending requirement of $3,000 within 3 months of opening the card, so we placed all of our bills and spending on the card to hit the spending requirements. We automated our bills to be paid by credit card each month, so it was as simple as going to the web pages and changing the payment information.

Once we hit the spending requirements, we ended up with about 55,000 total points on each card after our spending. We were able to log into www.thankyou.com to see our total points

ThankYou Points

There are a ton of ways to use the points (travel, gift cards, etc) under the “Shop” tab, but I was unable to find the “Student Loan Redemption” section. I used the “Search Rewards” bar at the top and typed in “student loan”, which brought me right to this page below:

ThankYou Points 2

There was a redemption drop down with different amounts, but the button to redeem just said “call to redeem.” I called in, and they gave me the low-down.

  • Points could be redeemed toward a student loan or mortgage payment
  • Payments would be made by check from “Thankyou Rewards” and mailed direct to the institution
  • Payments can only be made in the following amounts; $25, $50, $75, $100, $250, $500, $750 and $1000.
  • You MUST call your institution and make sure they can accept a check from a 3rd party institution

Since our student loans were transferred to yet ANOTHER federal loan servicer (MOHELA, in case you were wondering), I had to call them anyway to ensure auto-pay was still set up. I gave them a ring and asked them about accepting checks from a 3rd party, such as my bank (Citi Bank, that is). They said yes, no problem, but they required the checks be mailed to a specific address. I got the mailing information (name, PO Box) and was also told to put my student loan account number and name on the checks as well.

I called Citi back and let them know that yes, we could send a check to our student loan servicer, no problem. I told Citi I wanted to use ALL the points, which put me at $550 total for each card. Since they only do specific increments, they are sending two checks per card, one for $500 and one for $50. The checks are sent straight to our address to add the additional account info, and we will then mail them to our student loan account!

BOOM! $1,100 paid down using nothing but credit card rewards!

UPDATE: Payment Has Been Applied!

Student Loan Update 2

Student Loan Update

Can I Do This With Other Cards?

Once I found out about the potential to pay down our student loans with credit card bonuses, I started looking around at other options to do this. I found a few options that we want to pursue to pay them down even more. I’d like to put at least another $2,000 onto the loans with rewards in the next 12 months 🙂

  • Capital One Spark Cash Business Card. Just signed up for this card. Will give us $500 CASH after spending $4,500 within 3 months. At 2x cash back, we’ll be able to put $590 onto the loans after we hit the bonus.
  • Chase Sapphire Preferred. It’s been over two years since Michelle and I applied for these. If we can grab two more, they pay out 40,000 bonus points after spending $4,000 in 3 months. After the spend, that’s 44,000 bonus points, which we can redeem for cash back, meaning $440 per card, or $880 total.

We also have another 50,000 Chase points sitting around for the occasional Hyatt stay, but if we convert to cash, that’s another $500! That would put our grand total at $3,070 paid on the student loans with credit card points! That’s pretty insane, considering we only have $6,000 left on the loans.

Want To Do This Too?

If you want to follow along, always ben on the lookout for the best credit card bonuses. I find them by digging all over the internet, but I’ll share a few of them right here.

  • Citi ThankYou Premier – 50k bonus after spending $3,000 in 3 months. Can be put toward student loan or mortgage payment. 50k points worth $500.
  • Capital One Spark Cash Business Card – $500 bonus after spending $4,500 in 3 months. Only for those who own a business (hint: selling stuff on eBay qualifies you as a biz).
  • Chase Sapphire Preferred – 40k bonus after spending $4,000 in 3 months. Can be converted to cash back via a statement credit. Occasionally there’s a 50k bonus, maybe like once a year. 40k points worth $400.

Note: These are not affiliate links, I do not receive any compensation if you sign up for these cards.

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Comments

  1. Sharon Berg says:

    Few questions Mr. iheartbudgets ?! So each time you open up a credit card you and your wife get two separate accounts or does it link? Also does using all the credit cards require you to have several credit cards? How do you juggle the use of all the credit cards? If your credit is fairly new (say 3 years old but in good standing) what is the likely chance you’d be approved for any of these cards? Thanks!!

    • Mrs. Berg, Thanks for asking those questions. Let me answer them in order:

      1. No, each card applied for is a separate account. They cannot be linked.
      2. You can apply for one card at a time (we usually do 1 or 2), no need for multiple cards. It should be dictated by how much you spend per month on them. If you need to spend $4,000 in 3 months, you need to ensure you can spend $1,333 per month to get the bonus.
      3. I use a spreadsheet and mint.com to track my cards. The spreadsheet shows when I was approved for the card, how much I need to spend by when, and whether or not the annual fee is waived.
      4. New credit isn’t as much of an issue, but applications are usually based on credit score. If your income is above, say $40k, and your credit score is 730, you should be approved. You can check your credit score on creditkarma.com (though they will spam you), or (even better), Mint.com just came out with a free credit score feature. As long as you are above 730, you should be good to go.

      Feel free to email me directly if you’d like help doing any of these things 🙂

  2. Have you already applied for the new Chase cards? They have changed the terms and conditions and you may not get the bonus again. The Doctor of Credit had an article on it this week. Couple that with the number of applications in a certain time frame test (looks like 5 or more cards in 24 months) and it shows that Chase really hates churners and is really cracking down on them.

    I am just curious if you are having the same problems many others are experiencing.

    Also this is a very interesting use of rewards and one I never considered.

    • I haven’t yet, I read about the new restrictions, and even saw warnings when transferring my UR’s from one account to another. We’ll see how the Sapphire Preferred app goes early next year…

      And yeah, I love the idea of paying down debt using points. It’s counter-intuitive, but oh so beautiful 🙂

  3. Great job! You’re doing it right!
    Holly@ClubThrifty recently posted..Shopaholics, Step Away from the Clearance AisleMy Profile

  4. Woohoo! Nice work. It’s kinda awesome seeing $500+ disappear by doing almost nothing, isn’t it? 🙂

Trackbacks

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  3. […] my friend Jacob from I Heart Budgets executed this strategy to take a chunk out of his family’s lingering $6,000 student loan debt. […]

  4. […] debts — including those nagging student loan bills. Recently, my friend Jacob from I Heart Budgets executed this strategy to take a chunk out of his family’s lingering $6,000 student loan debt. […]

  5. […] my friend Jacob from I Heart Budgets executed this strategy to take a chunk out of his family’s lingering $6,000 […]

  6. […] my friend Jacob from I Heart Budgets executed this strategy to take a chunk out of his family’s lingering $6,000 student loan debt. […]

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  8. […] Wade from I Heart Budgets paid down $1,100 in student loan debt using the Citi Thankyou Premier card. Using this particular […]

  9. […] Wade, blogger at I Heart Budgets used this very strategy to pay down $1,100 on his student loans. Wade and his wife both signed up […]

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