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How to take control of college student credit card debt
Plan your finances and stick to your budget.
College student credit card debt is fairly common. In fact, according to the 2016 Experian College Graduate Survey Report, college students have an average of $2,573 in card debt.
Clearing your balance may seem overwhelming, especially when you want to focus on academics and extracurriculars. But with solid budget management, you can become debt-free — and set yourself up for a bright financial future.
Step 1: Evaluate your credit card debt
To start, map out your debt. List the following with a spreadsheet or a simple pen and paper:
- Which credit card provider or providers your debt is with.
- How much money you owe on each card.
- The APR and minimum monthly payment for each card.
Now that you know exactly how much you owe, you can start figuring out how to tackle your debt.
Step 2: Decide on an overall 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. Below, you’ll find a few tried-and-true strategies. Pick the one you like best and stick with it.
With the snowball method, you’ll first pay off the credit card with the smallest amount of debt. After you do that, pay off the card with the next-smallest debt, and so on until all debts are cleared.
The idea behind this strategy is you’ll become even more motivated to tackle your debt each time you completely pay off a card. 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 first pay off the credit cards with the highest interest rates. For example, if you have one credit card with a 17% APR and another with a 22% APR, you’ll pay off the latter first. While you might not get the same quick wins as you would with the snowball method, you’ll pay less interest over the long run.
Balance transfer credit card
This type of card comes with a 0% intro APR period on balance transfers. It’s almost like pressing “pause” on your interest, which can help you pay off your debt faster. You could transfer your debt to a qualifying card, then pay off your entire balance before your intro APR expires. 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.
Quick tips to clear college student credit card debt
After selecting an overall debt-reduction strategy, see if you can stack the odds even more in your favor. Consider these tactics:
Make weekly payments when possible
If you receive a weekly or bi-weekly paycheck, 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. For example, if your monthly payment is $400, your weekly payment is $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 can pay slightly more without even realizing it.
As you’ll see in the table below, paying weekly helps you put $400 more toward your debt over a year.
|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 if your credit score is good and you’re not behind on your payments. If your bank won’t budge, you can say 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 typically best to be honest about your situation.
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. You may be surprised how far asking can get you.
Step 3: Calculate monthly payments to clear your debt
Now that you see the big picture about your debt, figure out how much you’ll pay toward your balance each month. Use our repayment calculator below for help with this, inputting details into each section:
Credit card info.
Enter the debt you have on one credit card. Then enter the card’s interest rate.
Calculate months to payoff.
Here, you can enter how much you’d like to pay toward your debt each month. The calculator will tell you how many months it’ll take to clear your debt at that rate.
Calculate monthly payment.
Use this section if you’d rather set a definite time to pay off your debt. You’ll see how much you’ll need to pay monthly to meet that goal.
Once you have your monthly payment, resolve to put it toward your credit card debt consistently. You could be out of debt faster than you think.
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Moving forward: How to avoid credit card debt as a college 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 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 college 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 because it keeps you from accumulating too much debt or exceeding your credit limit.
Stick to a budget.
Create and stick to a budget. Also, consider reducing your credit limit — call your provider to do this — or leaving your card at home when you don’t need it.
Set up autopay.
By setting up automatic payments, you’ll never miss a bill due date — excellent news for your credit score.
If you don’t want to use autopay, consider setting up reminders to pay your bill in your calendar or on your phone.
Be very careful with balance transfers and cash advances.
Outside of an intro-APR period, balance transfers start collecting interest immediately. The same goes for cash advances.
When you’re in college, it’s easy for credit card debt to pile up. You might not have the experience or income to get through debt-free.
But by getting clear on your debt and forming a plan to attack it — including leveraging the right student cards — you can pull it off. As you do, you’ll build positive financial habits that’ll benefit you for years.
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