If you’re a college or university student with credit card debt, you’re not alone. Many students use credit cards to pay for school books and everyday costs such as food, dining out and social drinking.
Clearing your debt may seem overwhelming, especially when you’ve got student loans. But with decent budgeting management, you can be debt-free quicker than you think.
Evaluate your credit card debt
Before you take control of your debt, you need to understand exactly how much you have. Take a pen and paper and write out:
Which credit card provider(s) your debt is with.
How much money you owe on each card (if you have more than one card).
Your minimum payments.
For your convenience, we created a repayment calculator to help you find out the amount you’ll need to pay.
Disclaimer: While we’ve made every effort to ensure the accuracy of this calculator, results are for your general information only and not intended to reflect your specific circumstances. Do your research before applying for any credit card or signing any contract.
Scotiabank Value Visa Card
Scotiabank Value Visa Card
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 when your new credit card account is opened by 31 October 2019.
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
Credit rating: 650+ recommended credit score
Minimum income: $12,000
Minimum age: Age of majority in the province/territory of residence
Creating a budget will give you an overview of where you spend your money. Once you have your budget set out, adjust and minimize unnecessary spending – but don’t nitpick when doing this; focus on the long term. Remember that you’re trying to pay off your debt as soon as possible. Once you’ve got your debt paid off, you can treat yourself once in a while again.
Design a plan that fits your finances
Everyone’s financial situation is unique. Someone could have higher debt than average, while another could have a lower income. Whichever group you fall into, you still have options.
Here are some ways you can pay down your debt faster:
Apply for a balance transfer credit card
This type of card comes with a low or 0% intro APR period on balance transfers, meaning you save money on interest, which can help you pay off your debt faster. For every transfer you make, there’s likely going to be a balance transfer fee of 1-3% of the transferred amount. Keep an eye on this fee and the balance transfer offer if you’re set on getting a balance transfer credit card.
You’ll also want to figure out how much you can transfer onto the card. If you have multiple balances you want to consolidate, you’ll likely need a higher credit limit than if you were just transferring one balance. As an example, some providers only let you transfer up to 70% of your credit limit.
Make use of a debt consolidation loan
A debt consolidation loan could be another potential solution, especially if you have higher balances or if you owe money to multiple accounts.
If you opt for a debt consolidation loan, you can combine your debt from all accounts into one monthly payment. This could potentially lower your monthly interest payments and help you pay off your balance faster.
Use the debt snowball method
The snowball method is a debt-reduction strategy designed for those who owe money to more than one credit card account. This strategy can be motivating since you’ll slowly reduce the number of debts that you have. This is how it works:
Start making minimum payments on all debts, except the smallest.
Pay as much as you can on your smallest debt and repeat until you pay it off.
Move on to the next smallest debt while still paying the minimum payments on your remaining debts.
Once you pay off this debt, move on to the next smallest until all debts are paid off.
Make weekly payments when possible.
If you’re receiving a weekly or bi-weekly paycheque, consider switching to weekly payments instead of monthly. To start off, divide your monthly payments by four. For example, if your monthly payment is $400, you have to make a weekly payment of $100.
The logic behind this is that most months have four weeks, while some have five. For the months that have five weeks, you are actually skipping one potential weekly payment when you pay $400 instead. With weekly payments, you would pay $500. That’s four weeks skipped in a year.
Plus, interest is calculated daily, which means you’ll save a little on interest by paying off the balance weekly instead of once a month.
Total yearly payments
If all else fails, seek help. Friends and family should be your first choice, but you can also reach out to professionals who can help you out. You may be surprised how far asking can get you, even if your pride takes a hit.
Negotiate with your creditors.
Most of the time, you can negotiate your credit card terms, interest rates and payments. But this typically depends on the credit card provider and your personal situation.
The most important factor here is timing. You’ll have more success if your credit score is good and you’re not behind on your payments. If your provider won’t budge, you can say you’re planning to move to another provider 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 typically best to be honest about your situation.
The best way to pay off your debt and avoid it in the future is to improve your financial habits. This includes:
Sticking to your budget. This should be a general guide, which you can update or adjust as your needs and income fluctuate.
Setting up automatic payments. If you’re busy and you can’t keep track of your due dates, set up auto payments or reminders. This can help you avoid unnecessary fees and interest charges.
When you’re in university or college, it’s easy for your credit card debt to pile up. You’ve got lots of expenses and not many students have the experience and the necessary income to get through debt-free.
Yes. While weekly payments have more measurable results than sporadic ones, multiple payments in any form can help reduce interest charges by getting the principal amount paid down faster.
Yes. Instead of paying the smallest debt, you start paying off the largest debt. This is called the debt avalanche method.
The method that’s best for you depends on your financial situation. Some find the snowball method more motivating, while others prefer the potential additional savings that the avalanche method provides.
Kevin Joey Chen is a credit cards writer at finder.com. He's passionate about helping you get your finances in order and travel the world like a pro. He's taken an extended trip around Europe as a digital nomad, gaining firsthand experience with exchange rates, ideal (and not-so-ideal) credit and debit cards, foreign transactions and budgeting strategies. He earned his BA from UC Davis and has written across many niches at Finder, including cryptocurrency, personal loans, car insurance, real estate and money transfers.
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