How to take control of your student credit card debt

Make a plan to tackle your finances and come out on top.

Updated

Post-secondary student credit card debt is fairly common. In fact, according to the 2018 Canadian University Survey Consortium Graduating Student Survey, university students have an average of $2,771 in credit card debt and 21% of students with a credit card don’t pay off their balance each month.

Clearing your balance may seem overwhelming, especially when you need to focus on academics. But with some simple financial management, you can become debt-free and set yourself up for a bright financial future.

Scotiabank Value Visa Card

Scotiabank Value Visa Card

12.99 % APR

Purchase interest rate

Eligibility criteria, terms and conditions, fees and charges apply

Scotiabank Value Visa Card

Apply today and enjoy a 0.99% introductory interest rate on balance transfers for the first 6 months.

  • Purchase interest rate: 12.99%
  • Cash advance rate: 12.99%
  • Intro balance transfer rate: 0.99% for the first 6 months
  • Standard balance transfer rate: 12.99%
  • Annual fee: $29
  • Minimum income: $12,000
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Step 1: Evaluate your credit card debt

Visually map out your debt. List the following in a spreadsheet or on paper:

  • Name the credit card provider or providers your debt is with.
  • Put down how much money you owe on each card.
  • Put down the interest rate charged for each card.
  • Approximate the minimum monthly payment (from your payment history) and due date for each payment for each card.

Now that you know exactly how much you owe and when your payments are due, you can start figuring out how to tackle your debt.

Step 2: Decide on a strategy to eliminate your debt

There are several strategies to clearing debt, and the right one will depend on factors like your level of debt and how fast you want to pay off your balance. Click through the tabs below to find a few tried-and-true strategies. Pick the one you like best and stick with it.

Snowball method

With the snowball method, you’ll pay off your credit cards beginning with the smallest amount of debt first. After that, pay off the card with the next-smallest debt, and so on until all debts are cleared.

The idea behind this strategy is the physiological satisfaction you get from quicker “wins” – you’ll become more motivated to tackle your debt each time you completely pay off a card. By paying off the smallest debit first, you get that reward quicker. It’s not the method to use if you want to pay the lowest possible interest over time, but it can be helpful if you need the psychological boost.

Debt avalanche method

With this method, you pay off the credit card with the highest interest rate first. The goal of this method is to prevent you from paying more accumulated interest over time than you need to. For example, if you have one credit card with a 17% interest rate and another with a 22% interest rate you pay off the latter card first regardless of the balance amounts on the cards. While you might not get the same quick “wins” as you would with the snowball method, you will pay less interest over the long run.

Balance transfer credit card

You could transfer your debt to a qualifying balance transfer credit card, then pay off your entire balance before your intro APR rate expires. A balance transfer card comes with a 0% intro APR period on balance transfers. Transferring your debit to a card like this is almost like pressing “pause” on your interest, which can help you pay off your debt faster. This strategy is typically a better choice if you have a relatively small amount of debt.

Student credit cards usually have a shorter intro APR period than other cards — often around six months. Also, for every transfer you make, there will likely be a balance transfer fee. Keep an eye on these two factors if you’re set on getting a balance transfer credit card.

Also, keep in mind how much you can transfer onto the card. If you have multiple balances you want to consolidate, you’ll likely need a higher limit than if you were just transferring one.

Step 3: Calculate monthly payments to clear your debt

Now that you see the big picture about your debt, figure out how much you should pay toward your balance each month. To do so, you’ll want to calculate the following:

  • Your minimum interest payment. The annual percentage rate (APR) reflects the amount of interest you’ll pay over an entire year. To determine this amount, divide your APR by the number of days in a year, then multiply the result by your balance. Take this figure and multiply it by the number of days in your current billing cycle. This is your monthly interest payment.
  • How many months it’ll take to pay off your balance making interest-only payments. Divide your balance by the monthly interest payment you calculated above to find out how many months it’ll take to pay off your credit card.
  • How many months it’ll take to pay off your balance making interest + principal payments. This is where you can test different debt repayment schemes to find one that fits your goals. Decide how much you’re willing to pay beyond your the minimum payment amount and recalculate how many months it’ll take to bring the balance to zero. Alternatively, decide when you want the balance paid off and calculate backwards to the monthly payment you’d have to make in order to meet this deadline.

Intentionally going over these numbers will help you get a clear view of how your payments fit into an overall debt reduction scheme. This will put you in a much better place to decide on a payment amount that reflects both your current budgetary needs as well as your future financial goals.

Compare balance transfer cards

Name Product Purchase Interest Rate Balance Transfer Rate Balance Transfer Fee Annual Fee Minimum Income Reward Description
BMO Preferred Rate Mastercard
12.99%
3.99% for the first 9 months (then 12.99%)
1%
$20
$15,000
Take advantage of an introductory balance transfer offer, annual fee waiver in the first year, and low purchase and cash advance interest rates.
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
BMO Rewards Mastercard
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Get 1 BMO Reward point for every $1 spent on eligible purchases, and get 2 BMO Rewards points for every $1 spent at participating National Car Rental and Alamo Rent A Car locations.
Earn a bonus of up to 15,000 BMO Rewards points. Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
BMO AIR MILES Mastercard
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Get 2 AIR MILES for every $20 spent at eligible AIR MILES partners, and get 1 AIR MILE for every $20 spent elsewhere.
Earn 800 AIR MILES Bonus Miles. Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
BMO CashBack Mastercard
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Earn 3% cash back on groceries, 1% on recurring bill payments and 0.5% on all other eligible purchases.
Get up to 5% cash back on all eligible purchases in the first three months of card membership (up to a maximum spend of $2,000, and earn 3% cash back on groceries, 1% on recurring bill payments and 0.5% on all other eligible purchases thereafter). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
BMO AIR MILES Mastercard For Students
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Earn 2 AIR MILES for every $20 spent at eligible AIR MILES partners, and earn 1 AIR MILE for every $20 spent elsewhere.
Earn 800 AIR MILES Bonus Miles. Plus, get a 1.99% introductory interest rate on balance transfers for 9 months. A 1% fee applies to balance amounts transferred.
BMO CashBack Mastercard For Students
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Earn 3% cash back on groceries, 1% on recurring bill payments and 0.5% on all other eligible purchases.
Get up to 5% cash back in the first three months (up to a maximum spend of $2,000, and earn 3% cash back on groceries, 1% on recurring bill payments and 0.5% on all other eligible purchases thereafter). Plus, get a rate of 1.99% on balance transfers for 9 months, with a 1% fee for every transferred balance.
No-Fee Scotiabank Value Visa Card
16.99%
3.99% for the first 6 months (then 16.99%)
N/A
$0
$12,000
Save with a low interest rate, no annual fee and a balance transfer offer.
Get a 3.99% introductory interest rate on balance transfers with a 0% balance transfer fee for the first 6 months. Apply by October 31, 2020.
Scotiabank Value Visa Card
12.99%
0.99% for the first 6 months (then 12.99%)
N/A
$29
$12,000
Save on interest for 6 months by consolidating your higher-rate balances with the balance transfer offer, and get an on-going 12.99% interest rate on purchases, cash advances and balance transfers.
Get a 0.99% introductory interest rate on balance transfers with a 0% transfer fee for the first 6 months. Apply by October 31, 2020.
Scotia Momentum Visa Card
19.99%
2.99% for the first 6 months (then 22.99%)
N/A
$39
$12,000
Earn 2% cash back on all eligible gas station, grocery store and drug store purchases and on recurring bill payments (up to a $25,000 annual spend), and earn 1% cash back on all other eligible purchases (and on all eligible purchases once the $25,000 annual spend is reached).
Get a 2.99% introductory rate on balance transfers and a 0% balance transfer fee for the first 6 months. Apply by October 31, 2020.
Tangerine Money-Back Credit Card
19.95%
1.95% for the first 6 months (then 19.95%)
3%
$0
$12,000
Earn 2% cash back in two categories of your choice (or three categories if you open a Tangerine Savings Account and directly deposit your cash back into the account), and 0.5% cash back on everything else.
Get a 1.95% interest rate on balance transfers for the first six months (valid within the first 30 days of account opening).
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Quick tips to clear your student credit card debt

After selecting one of the overall debt-reduction strategies above, see if you can stack the odds even more in your favor. Consider these tactics:

Make more (weekly) payments when possible

If you receive a weekly or bi-weekly paycheque, consider using this method. Take the monthly payment you want to put toward your debt, and divide it by four. Pay this amount each week even if there are more than 4 weeks in the month. For example, if your monthly payment is $400, your weekly payment is $100 regardless of how many weeks there are in the month.

The logic behind this is that most months have four weeks while some have five and making a payment every week as opposed to monthly will actually cut down your debt faster. With weekly payments, you can pay slightly more towards your debt without even realizing it.

Using our example, making a weekly payment instead of a single monthly payment helps you put $400 more toward your debt over the course of a year:

PaymentsMonthlyWeekly
Monthly debt$400$100
Total yearly payments$4,800$5,200

Negotiate with creditors

Most of the time, you can negotiate your credit card terms, interest rates and payments. But this typically depends on the credit card company and your personal situation.

The most important factor here is timing. You’ll have more success negotiating if your credit score is good and you’re not behind on your payments. If your bank won’t budge, you can suggest that you’re planning to move to another bank for better terms.

But if you’re already late on your payments, or you know you won’t be able to make your payments on time, it’s always best to be honest about your situation.

Seek help

If you feel like you’re drowning in debt, seek help. Friends and family should be your first choice, but you can also reach out to professionals who can help you out. There is always someone to help so reach out and ask.

Moving forward: How to avoid credit card debt as a post-secondary student

You’ve cleared your debt, or you’re in the process of doing so. That’s great news. Going forward, build the financial habits that’ll keep you out of debt for the rest of your life.

  • Pay off your credit card balance in full every month.
    By paying in full each billing cycle, you won’t be charged interest. This is one of the key habits to build as you finish your academic career and move into the next phase of adulthood.
  • Keep your balance low.
    Most experts recommend keeping your credit card balance under 30% of your total credit limit at all times. This is a great idea to keep you from accumulating too much debt or exceeding your credit limit. Also, consider reducing your credit limit — call your provider to do this — or leaving your card at home when you don’t need it.girl-studying-library
  • Stick to a budget.
    Create and stick to a personalized budget. It doesn’t have to be complex, just keep it simple. Lay out your expenses and see where your money needs to go and when everything is due.
  • Set up autopay.
    By setting up automatic payments, you’ll never miss a payment due date which is excellent news for your credit score. If you don’t want to use autopay, consider setting up reminders – use your phone’s calendar and notifications to remind when you to make payments.

Bottom line

When you’re in university or college, it’s easy for credit card debt to pile up. But by getting a clear picture of your debt and forming a plan to attack it you can pull it off. As you do, you’ll build positive financial habits that’ll benefit you for years. Instead of being a negative, manged wisely, using a student credit card can help you build your credit for your future.

Frequently asked questions

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