The beauty of cash-back credit cards is that you can use your rewards for just about anything. Here’s how 4 people used their cash back to pay down student loans.


When you’re paying off student loans, every cent counts. Whether it’s change dug from the couch cushions or a $US100 birthday check from your grandma, consistently putting small windfalls toward your loan balance will add up over time.

One of the best ways to drum up extra funds to put toward your student loans is by using a credit card that earns you cash back. Here are some success stories from financial experts who have done just that.

Read more:
How to make your first student loan payment after college

Keep in mind that we’re focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which can far outweigh the value of any rewards.

When you’re working to earn credit card rewards, it’s important to practice financial discipline, like paying your balances off in full each month, making payments on time, and not spending more than you can afford to pay back. Basically,

treat your credit card like a debit card


How the experts have done it

While some credit cards provide miles or points you can use for travel, gift cards, or merchandise, others give you cash back. This cash back is usually redeemable as a check, direct deposit, or statement credit.

Jacob Wade from I Heart Budgets discovered that he could put those cash-back rewards toward his student loans. He and his wife used a Citi Premier℠ Card to earn $US1,100 in cash back through everyday spending.

“I was able to send four checks direct from Citi’s points centre,” he said. “They actually had a ‘Student Loan Rebate’ option for the Thank You points to be redeemed.”

Riley Adams, CPA, of The Young and the Invested, used rewards from two Capital One credit cards to pay off part of his wife’s medical school loans. At first he used one offering 1% cash back, but then switched to the Capital One® Quicksilver® Cash Rewards Credit Card with 1.5% cash back on every purchase, accelerating his reward accrual.

“In total, the cash rewards came to around $US500 and helped us get this first round of student loans behind us,” he said.

He had the money transferred to his Capital One bank account and sent that money to the student loan servicer. Adams said it took almost two years to earn that $US500. He and his wife have about $US60,000 left on her student loans and another $US500 in cash-back rewards they’re planning to add toward the loans.

YouTuber Rachael Lyn has about $US140,000 in student loans and has applied $US215.35 extra toward her balance. Even though it doesn’t seem like much, it covers one minimum payment from her grad school loans. She plans to keep using this strategy until she repays her loans in full.

“At this rate, I estimate the rewards points will save me almost a year of payments,” she said.

Rachael said she has three different cards she uses for everyday spending. She even keeps a cheat sheet in her wallet to remember which card is best for which category in order to maximise her cash back.

Kyle Kroeger of The Financial Wolves added the sign-up bonuses from the Chase Freedom and the Chase Freedom Unlimited cards toward his student loans, as well as the cash-back rewards he earned from using the cards. Kroeger earned $US700 total.

Right now, the Chase Freedom is offering a $US150 sign-up bonus when you spend $US500 in the first three months, and the Chase Freedom Unlimited is offering up 3% back on all purchases in your first year up to $US20,000 spent, then 1.5% back on all purchases.

These cards are especially popular with students and recent grads, because the bonuses are easy to earn even for a frugal spender on an entry-level salary. Plus, neither card has an annual fee.

Read more:
The best no-annual-fee credit cards from Wells Fargo, Amex, Chase, and Citi

“I applied for these cards right when I graduated from college because of the small upfront bonus and the high likelihood of me getting approved,” Kroeger said.

Click here to learn more about the Chase Freedom from our partner The Points Guy.

Click here to learn more about the Chase Freedom Unlimited from our partner The Points Guy.

How to pick the right cash-back credit card for you

Choosing the right card is key for this strategy to work. If you pick a card with narrow cash-back categories that you rarely spend in, you won’t earn much. If you choose a card with a complicated minimum redemption policy, you could be waiting forever to cash out.

Find a card that fits your lifestyle and spending habits. If you eat out a lot, for example, you might pick a card with a high cash-back rate for dining, like the Capital One Savour card. If you fly a lot for work, pick a travel card. Ideally, you should also find a card with a significant sign-up bonus so you can get a large sum of cash back quickly.

You should also be mindful of annual fees. There are plenty of cards with high cash-back rates and no annual fees, like the Wells Fargo Propel American Express® card, the but that’s not always the case.

You should also be aware of how point values change when redeemed for different categories. For example, a point may be worth 1 cent when redeemed as cash, but worth 2 cents when redeemed for travel rewards. If your goal is to save for travel and pay off your student loans, you should know when to redeem for travel and when to pay down your student loans.

Research your card options carefully before picking one, since opening a new card will slightly decrease your credit score in the short term. If you apply for cards that aren’t a good fit and get declined, you could hurt your chances of being approved for another one.

Once you get approved, track your cash-back rewards and redeem them as soon as you’re eligible. Some cards have a minimum redemption threshold, while others let you redeem any amount. If you’re eligible for a sign-up bonus, read the rules carefully so you don’t miss out.

Read more:
The best cash-back credit cards

Use credit cards responsibly

You should never splurge or go over budget just to earn cash back, or any other credit card rewards. Putting yourself in financial trouble to earn extra rewards will just make it harder to make loan payments in the future. If you end up not paying your balance in full, the interest you’ll owe will exceed any bonus rewards or cash back.

“We always treat credit cards like cash,” Wade said. “We won’t spend money we don’t already have in the bank.”


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