Not a lot of people pay college tuition bills with a credit card. But some do — whether for convenience or to get those nice rewards points.
Colleges didn’t always charge a “convenience fee” for people who pay their bills with credit cards. But in recent years the number of families using credit cards started to add up to a point where colleges say they can no longer afford to absorb the transaction cost.
Now the majority colleges have begun to protect themselves against the fees that card processors charge them by requiring parents and students to pay an additional fee of about 2.62 percent for using a credit card.
The University of Pittsburgh, Duquesne University and Carnegie Mellon University all accept credit card payments and they all charge transaction fees, although officials at those schools discourage the practice of using credit cards for college expenses. They also say the universities make no profit from the transaction fees they charge.
John Fedele, a spokesman for the University of Pittsburgh, said Pitt does not profit from convenience fees. The university does not directly accept credit cards as payment for tuition, room and board, and fees. A third-party vendor processes payments when made through PittPAY, the institution’s online payment program. The vendor charges a 2.75 percent fee for its use.
“Pitt discourages the use of credit cards for these types of payments because the terms of credit card companies are usually less favorable to borrowers than traditional student loans,” Fedele said. “While we can’t speak for other schools, absorbing the credit card fees can run into hundreds of dollars per student and colleges and universities across the nation are under pressure to keep costs down.”
Duquesne University’s vendor is Nelnet Business Solutions, which charges a service fee of 2.55 percent when students or parents pay with a credit card online, according to Rose Ravasio, the university’s spokeswoman. She said at this point in the fiscal year, there have been 440 credit card transactions on tuition accounts. Last year at this time, there were 442.
At Carnegie Mellon University, spokesman Ken Walters said credit card usage accounts for about 1.5 percent of all payments. “There has been little change in usage since CMU began offering this option in 2013. We discourage the use of this service in general, but made it available after receiving consistent requests from our bill payers,” Walters said.
Fedele at the University of Pittsburgh said he was unable to provide information on parents and students who pay college costs at Pitt with credit cards.
People who pay tuition bills with a credit card incur an average “convenience fee” of 2.62 percent, according to a new CreditCards.com report, which surveyed 300 of the largest U.S. public, private and community colleges. That translates to $262 for every $10,000 of tuition.
Community colleges are the most fee-friendly. Out of the 100 largest community colleges surveyed, 97 percent accept credit cards for tuition payment and only 8 percent of them charge convenience fees. By contrast, 93 percent of public universities and 77 percent of private institutions that accept credit cards charge convenience fees.
CreditCards.com, based in Austin, Texas, conducted a survey in 2014 and another one earlier this year which found the number of colleges accepting credit cards fell 260 to 255. However, the number of schools charging a convenience fee went up from 142 in 2014 to 145 this year.
“It doesn’t surprise me more schools are charging the fees simply because they don’t want to eat the cost of those credit card transactions,” said Matt Schulz, senior industry analyst at CreditCards.com. “The number of schools not accepting credit cards probably stopped doing so because the population of students using cards was not high enough to make it worth while.”
He said the majority of community colleges don’t charge a fee for credit card use because community college doesn’t cost nearly as much as a big university — public or private.
“The lower the tuition cost the more likely someone is to consider putting the cost on a credit card,” he said. “There is a big difference between putting $1,500 on a credit card than $15,000.”
Private student loan lender Sallie Mae released a report earlier this year showing the percentage of parents using credit cards to pay for college runs 2 percent to 3 percent. However a higher percentage of students use credit cards to pay college bills at 3 percent to 5 percent.
Ben Woolsey, president and general manager of CreditCardForum.com., based in Austin, Texas, said retailers have always had to bear transaction fees for credit card purchases and they pass it on to consumers by increasing costs.
“Other entities also accept credit cards like state and local government,” Woolsey said. “Even the federal government allows taxpayers to use credit cards to pay taxes, but they also charge the consumer a convenience fee so they do not have to absorb that interchange fee.
“All of it is colleges protecting their bottom lines,” he said. “They are trying to make a profit and they don’t want to accept less than 100 percent of the tuition they are owed. My guess is people who use credit cards to pay tuition already have the money in the bank, but they want to earn rewards. This removes the incentive to do so because the convenience fee is higher than any rewards they earn.
“Overall, credit cards are a terrible way to finance long-term debt,” Woolsey said. “Tuition is a long-term debt and student loans are probably a better way to pay for college in the long run.”
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