If youre like most college students, youll have $2,000 in
credit card debt by the time you graduate. If you only pay the minimum each month, that $2,000 could take 7 years to pay off and cost you $1,000 in interest. Save yourself money by avoiding credit card debt, or paying it off now if youve already built up a balance.
Avoid College Student Credit Card Debt
Having a
credit card is not a bad thing. It will help you build a credit history if you use it wisely. Dont accept credit cards with interest rates above 16%. If the offer is 3% now, but 18% in six months, say no. You should also look for a card with no annual fee. There are so many free cards out there, theres no reason to pay for one. Also make sure youre not required to carry a balance in order to get a free reward, like a computer or iPod. In that case, the computer isnt free; youre paying for it with interest on your other purchases.
If youve already accepted a card with high interest or fees, pay it off or transfer the money to a low-interest, no-fee card and close the other account.
Use Credit Wisely
Use your credit card carefully. Before you buy something, ask yourself if you can afford to pay for it in full at the end of the month. If you cant then wait to buy it.
Remember, even though it seems easy to charge things now, you will eventually have to pay for that purchase. At minimum wage, or a low starting wage after college, youll have to work more than 23 hours to pay for a $200 cell phone plus interest.
Its a good idea to have a credit card on hand for emergencies and necessities. Car repairs and groceries are necessities.
Pizza, movies, and concert tickets are not. If you earn enough to pay the bill for those fun things at the end of the month, then its okay to charge them.
Dont Carry a Balance
According to a credit card myth, carrying a balance improves your credit score. This isnt true. Carrying a balance attracts more credit card offers, and it costs you more money. Try to pay off your credit card every month.
Pay Off Student Credit Card Debt
If youve already
accumulated debt, dont wait until you graduate to start paying it off. The sooner you start, the less money it will cost you in the end.
Follow these tips to get out of debt faster:
Pay off the card with the highest interest rate first. Pay as much as you can on that card and the minimum on the rest of your cards. When the first one is paid off, start paying more on the second one. If you dont have a part-time job, get one so you can start paying your debts.
Dont charge new purchases. If you cant avoid the temptation to charge more, ask your parents to hold onto your cards. If you want to fit in with friends who have cards,
get a debit card. Its convenient and it wont collect interest because the money is removed from you bank account right away.
Always pay on time. If youre late, even by one day, your credit card company can increase your interest rate to 29% and charge you a hefty late fee. Your other credit card issuers can also boost your interest rate, even if you arent late paying them.
Ask for a lower interest rate. Your credit card company wants to keep you as a customer. If you ask for a rate reduction, they might do it. While youre on the phone, ask them to reduce your credit limit so you cant charge anything else on the card.
Transfer your balances. If you have money to make payments and your card companies wont reduce your rate, apply for a low-interest rate card and transfer your balances. Then pay off the card before the low-interest period runs out.
Its best to avoid student credit card debt, but if you already have it, dont wait to pay it off. The faster you get out from under the debt, the sooner youll be able to enjoy more of your money after college.
