What Are The Best Credit Cards For Paying Education Expenses?

As any parent will attest to, educating a child is an expensive task in Singapore. Here are some card picks to make it sting a little less.

A 2018 survey by HSBC bank found that parents spend a total of about $97,000 on their child’s education.

If you’re going to have to spend all that money anyway, the question then becomes how to earn something out of it. While it’s tempting to just do a bank transfer and call it a day, you may be missing out on lucrative credit card rewards that can effectively lower the overall cost.

That’s assuming the university, enrichment or tuition centre accepts credit cards (or even if they don’t!), you’ll definitely want to read on.

What MCC code do education expenses fall under?

The first step is to understand what MCC education expenses code as. An MCC is a four-digit code that describes a merchant’s primary line of business, and is used by banks in deciding which transactions to award or exclude points.

Education providers use the following MCCs:

• 8211: Schools, Elementary and Secondary
• 8220: Colleges, Universities, Professional Schools and Junior Colleges
• 8241: Schools, Correspondence
• 8244: Schools, Business and Secretarial
• 8249: Schools, Trade and Vocational
• 8299: Schools and Education Services Not Elsewhere classified

Merchants processing under these MCCs usually pay a lower-than-average service fee, which means these transactions are less profitable for banks. Consequently, banks are less inclined to offer rewards for these transactions, and it’s no surprise the ground for earning points on education expenses is rapidly shrinking.

Which credit cards earn rewards for education expenses?

With every year that goes by, it seems like more and more banks exclude education expenses from earning rewards points. Citibank excluded education transactions in October 2018, UOB in September 2019, Standard Chartered in May 2020, Bank of China in June 2020, and HSBC in July 2020.

As it stands, only American Express and Maybank cards still earn points on education.

This is a particular conundrum, because American Express acceptance remains hit and miss, and the only Maybank card with a decent miles earning rate is the Maybank Visa Infinite. This card is only available to those who earn at least $150,000 a year, and don’t mind paying the $600 annual fee (at least they waive it in the first year!).

In other words, your options are as follows:

^Valid in June and December only

Based on the table above, the best you could hope to earn is 2.0 mpd for overseas education expenses paid with an AMEX KrisFlyer Ascend or Maybank Visa Infinite, or 1.2 mpd if the transactions are in local currency.

Alternative card options

The recently-launched Razer Visa prepaid card would earn 1% cashback on all purchases, including education. But if you’re thinking of heading down the cashback route, you might as well use the Maybank FC Barcelona Visa Signature card for 1.6% cashback instead.

Do note that the 1.6% cashback only applies if you’re paying in local currency. Otherwise you’ll earn 2 TREATS points per $1, which is equivalent to 0.8 miles per dollar.

For American Express True Cashback cardmembers fretting about AMEX acceptance, a possible workaround is to top-up your GrabPay account, and then use your GrabPay Mastercard to make payment.

You’ll earn 1.5% cashback on the top-up, and further GrabRewards points on the GrabPay Mastercard. This effectively ‘turns an AMEX into a Mastercard’, helping circumvent the issues with acceptance.

What if credit cards are not accepted?

If you have none of the cards above, or if the party you’re paying does not accept credit cards, not all is lost. Those who are willing to pay a small fee in exchange for miles can leverage the following bill payment services:

• AXS Pay+Earn (2.5% fee)
• CardUp (2.25% fee)
• Standard Chartered Easybill (2% fee)
• Citi PayAll (2% fee)

For example, if you had a $1,000 tuition fee to pay, you could use Citi PayAll and charge the expense to your Citi PremierMiles Card (Citi PayAll will make a bank transfer in your name to the receiving party). An admin fee of S$20 would be levied (2%), and you’d earn 1,200 miles ($1,000 @ 1.2 mpd). You’re basically buying miles at 1.67 cents ($20/1,200) each.

Is that worth it? It all boils down to how much you value a mile, a figure that’s more art than science. I personally use a 1.8 cents per mile valuation, which means buying them at 1.67 cents could make sense.

Conclusion

Education expenses are likely to be big ticket purchases, so it really helps to be able to earn some rebate from your credit cards. Be careful not to mindlessly place it on your default card of choice – it’s highly likely you won’t earn anything!

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