Student Loans vs. Credit Cards

When money gets tight during school, many students end up using credit cards to cover things like tuition, rent, or textbooks. It feels fast and convenient, especially when the expense is urgent. The problem is that credit cards are not designed for long-term or high-cost educational expenses, and this is where many students experience the bulk of their financial stress.

Understanding the difference between student loans and credit cards, and when each one makes sense, can help you avoid unnecessary interest payments and make school more affordable in the long run.

How student loans work in Canada

Canadian student loans, including federal and provincial ones, are specifically designed to help cover education-related costs. These loans typically offer much lower interest rates than credit cards, and in many cases, no interest accrues while you are studying full-time. As of April 2023, Canada Student Loans are permanently interest-free, meaning you only pay back the amount you borrowed, not extra interest on top of it.

Another key difference is repayment flexibility. Student loans typically don’t require repayment while you are in school, and after graduation, options such as repayment assistance plans are available if your income is low. This built-in support is designed to alleviate financial pressure while you are establishing yourself and your career.

How credit cards work for students

Credit cards work quite differently. In Canada, most credit cards come with interest rates that often range from 19 percent to 22 percent, and interest starts accumulating as soon as a balance is carried past the due date.

Credit cards can be useful for short-term spending, emergencies, or expenses you know you can pay off quickly. Problems happen when they are used to cover high costs over long periods of time. Carrying a balance month to month means that interest accumulates quickly, which can turn a manageable expense into long-term debt.

Students frequently mention that credit card debt feels heavier and more stressful than student loans because payments are due immediately and balances accumulate faster. Unlike student loans, credit cards do not come with built-in protections or income-based repayment options. In fact, most banks are incentivized to keep you paying more and more interest. It’s one of the main ways that they make money.

Why loans are usually safer for school costs

For most Canadian students, student loans are a more sensible option for education expenses because they are specifically designed with students in mind. Lower or zero interest during school, delayed repayment, and government protections make them more forgiving if your income is limited.

Credit cards, on the other hand, are best used intentionally. They work well for small, short-term purchases like groceries, transit, or emergencies when you have a plan to pay the balance off quickly. Using them to fund tuition or rent often leads to higher overall costs and more stress later on.

This does not mean credit cards are bad. It just means they serve a different purpose. Problems often arise from using them as a substitute for student loans, rather than as a tool for short-term expenses.

A simple rule of thumb

If the expense is large, school-related, and unavoidable, student loans are usually the better option. If the expense is short-term and you know you can pay it off quickly, a credit card can be a sensible option.

Most students benefit from using a mix of both, but being clear about which tool is meant for what can prevent debt from getting out of control.