How to Pay for College Tuition (without a Credit Card)

If you expect to put your tuition on your credit card this fall, think again. A growing number of Canadian universities no longer accept credit cards for payment.

Many universities in Canada don’t want to spend money on credit card transaction fees. According to the Canadian Press, Dalhousie University in Halifax spent about $1 million last year in transaction fees. Dalhousie is one of the latest universities to announce it will no longer accept credit cards for tuition.

Here's a list of the Canadian Universities that won’t accept credit cards:

• Dalhousie University, Halifax, NS
• Mount Allison University, Sackville, NB
• St. Thomas University, Fredericton, NB
• University of New Brunswick, Fredericton and St. John, NB
• University of Prince Edward Island (ban will not take effect until Sept. 2010)
• McGill University, Montreal, QC
• Carleton University, Ottawa, ON
• University of Toronto, Toronto, ON
• Queen’s University, Kingston, ON
• University of Alberta, Edmonton, AB
• University of Calgary, Calgary, AB
• University of Victoria, Victoria, BC
• University of British Columbia, Vancouver and Kelowna, BC

How can I pay tuition without a credit card? 

Even with a part-time job and summer work, scraping up enough money to pay for four or more years of university is tough. Start by exploring every possible source of money that won’t need to be paid back. These options include:

• Job earnings
• Graduation gifts of money from parents and relatives
• Savings vehicles, such as a GIC or a RESP, which may have been started by family for you
• Grants, bursaries, or scholarships offered by your current school, your chosen university, your current workplace, or your parents’ workplaces
• Grants and bursaries available through the federal and provincial governments

Even with all of these resources, you may still be short. Credit can help you achieve your goals, but a credit card with a hefty interest rate isn’t the best option. Two prudent options are government loans and student lines of credit.

Paying tuition with a government loan

There are two categories of government loans for students in Canada. One is federal and the other is provincial. The government of Canada’s education website has an online calculator called the Student Financial Assistance Estimator. This tool will give you an idea of how big your student loan could be.

Here’s what you also need to know about government loans for post-secondary education:

• No interest on student loans for full-time students while you are still in school.
• Interest starts being charged on your loan the month after you leave school.
• The first payment is required six months after you leave school.
• You can make payments while still in school as a way to get on top of the loan.

Paying tuition with a student line of credit

Unfortunately, not every student is eligible for a government loan. The good news is that in a time of low-interest rates, a line of credit through a bank isn’t a bad option either. The interest rate for the Royal Bank of Canada’s student credit line is just prime + 1%, while the Bank of Montreal’s is prime +2%.

A line of credit is different from a regular loan. In a line of credit, the bank approves you for a certain amount, but doesn’t give it to you all at once. Instead, you have a fixed credit limit that you can withdraw from each year. Your credit limit gets reduced when you spend money, and rises when you pay money back.

Example:

A bank gives you a credit limit of $10,000 a year. You use $6,000 to pay for your tuition. Now your credit limit is only $4,000. You work part-time during the fall semester and pay back $1,000 on your loan. Now your credit limit is up to $5,000.

There are other ways a student line of credit is different from a government student loan:

• Interest is charged right away, but only on the money you actually use. In the above case, you would only be charged interest on $6,000, not $10,000.
• Most banks require that you pay the interest each month.
• Most banks don’t require payment on the entire loan until a year after graduation.
• You only pay back the amount of money that you’ve actually used.

Most banks let you access your line of credit through ABMs, debit cards, or line of credit cheques. It’s an easy way to for you to pay tuition, and your university will accept it.

Check your credit

Before you approach any bank for a loan or line of credit, it's important to check your credit report. Make sure you're creditworthy by seeing that all of your current and past accounts are in good standing, and that you pay back your debts on time.

Related: College Students: Do You Know These 4 Credit Card Tips?