transfer high-interest private student loan to permanent low-interest credit card?

[Anonymous]

Hello!  I didn't see this posted anywhere yet.  I have a private student loan thru Wells Fargo that has a variable interest rate.  It has a $9000 balance.  I have a credit card that gave me promotional checks at 2.9% interest for the life of the purchase.  I have no other balance on the card.  I would like to pay off that private loan so that the interest charged is permanently at 2.9%.  According to an online debt payoff calculator, I would save around $2000 in interest if I did that, and reduce my time in debt for that loan by 3 years if I paid it at $200 per month.  However, would transferring the debt from a student loan to a credit card, and really increasing my debt-to-credit ratio in my credit cards be a huge negative drop in my FICO?  It certainly would save me money!  I have one other credit card that has no balance, and a Home Depot card that also has no balance.  Any advice you have is greatly appreciated!

[Anonymous]

Someone else posted a similar question a while back -- and to my knowledge (and experience), you're not "allowed" to pay a SL with a CC. I know our SL servicer won't let us do that.

Most others that chimed in on that thread had the same experience. :/

[niecey89]

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@Anonymous wrote:
Hello!  I didn't see this posted anywhere yet.  I have a private student loan thru Wells Fargo that has a variable interest rate.  It has a $9000 balance.  I have a credit card that gave me promotional checks at 2.9% interest for the life of the purchase.  I have no other balance on the card.  I would like to pay off that private loan so that the interest charged is permanently at 2.9%.  According to an online debt payoff calculator, I would save around $2000 in interest if I did that, and reduce my time in debt for that loan by 3 years if I paid it at $200 per month.  However, would transferring the debt from a student loan to a credit card, and really increasing my debt-to-credit ratio in my credit cards be a huge negative drop in my FICO?  It certainly would save me money!  I have one other credit card that has no balance, and a Home Depot card that also has no balance.  Any advice you have is greatly appreciated!

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Yup, unfortunately you can not use a CC for STUDENT LOANs. We all wish we could 

[Cleanmachine]

May I ask "WHY" one can not pay off student loans with a credit card??

Seems to me that I could have the Balance transfer at 2.99% deposited directly in my checking account and then pay my student loan in full.

Is there some sort of Federal regulation that may prohibit this course of action???

[Anonymous]

There is no reason why you could not do exactly what you suggested by paying off the loan with a check you deposited into your own account from your credit card company using one of those balance transfer checks that you can deposit in your own account. This used to be a more popular way to avoid the non-discharge of student loans. If you ever go BK, they may do a look back on the source of the student loan payment funds. However, if the money is in your account and also contains other money, who is to say what money paid off the student loans?

[niecey89]

True but that would be from your personal account not from the credit card. Also look at credit card checks are like cash advances on your CC. the rates would be higher then the SLs.

[Anonymous]

I did just that. They sent me a check for the amount of my balance transfer, and charged me one fee. Then I paid higher balances as I chose. It was NOT considered a cash advance. Just make sure they don't double check that they don't care what you put it toward.

[Anonymous]

I called Wells Fargo, and they said as long as there was a routing number, I could use the credit card's check to pay the loan.  Also, someone else suggested writing the check to yourself and then paying it from your checking account.  Good idea!  There is no limit on what I can write the check for.  

But my actual question is THIS:  Will my FICO score drop if I switch my debt from a student loan to a credit card account?  The amount of debt will not drop, but the type of debt will change.  I appreciate any answers!

[Anonymous]

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@Anonymous wrote:

But my actual question is THIS: Will my FICO score drop if I switch my debt from a student loan to a credit card account? The amount of debt will not drop, but the type of debt will change. I appreciate any answers!

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Most likely, yes, it will drop. Revolving utilization counts for more in FICO scoring than installment util.

The ONLY reason it wouldn't drop is if you had MORE than enough revolving available. Meaning, you had enough revolving credit left over to have the "purchase" not bump your util higher than the preferred >9%.

So, if you're looking to plop $9K on your CC for your SL, you'd need at least $90K left in available credit in order to preserve/improve your FICO. And we're not even talking about the drop you'd see in pushing that one card close to it's max. 

Conversely, you can have 90% util on installment loans and FICO will barely budge after the initial drop for new accounts. 

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

But my actual question is THIS: Will my FICO score drop if I switch my debt from a student loan to a credit card account? The amount of debt will not drop, but the type of debt will change. I appreciate any answers!

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Most likely, yes, it will drop. Revolving utilization counts for more in FICO scoring than installment util.

The ONLY reason it wouldn't drop is if you had MORE than enough revolving available. Meaning, you had enough revolving credit left over to have the "purchase" not bump your util higher than the preferred >9%.

So, if you're looking to plop $9K on your CC for your SL, you'd need at least $90K left in available credit in order to preserve/improve your FICO. And we're not even talking about the drop you'd see in pushing that one card close to it's max.

Conversely, you can have 90% util on installment loans and FICO will barely budge after the initial drop for new accounts.

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Meant to specify: That's REVOLVING credit, obviously.

Bottom line is that you've found a way to circumvent the "system", but it will more than likely hurt you in the process. Unless, as I said before, you have a spare, unused $90K in revolving credit lying about.

And even if you DO have $90K in "spare" credit, remember that CLDs are running rampant nowadays. Plopping down that much could easily initiate a Financial Review and cause Adverse Actions in the form of CLDs. And who wants their friendly neighborhood CC chasing their balances???