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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 with more college students turning to credit for their spending needs. In fact, according to the 2019 Money Matters on Campus Report, nearly 30% of college students have more than $1,000 in credit card debt. While just 34% of students report using a credit card during their first two years of college, that number jumps to 65% by graduation and 82% by grad school.
Clearing your balance may seem overwhelming. With solid budget management, however, you can work toward being debt-free and setting 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 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 depends on factors like your level of debt and how quickly 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.
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. 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 that you can clear out in a year or less.
Student credit cards usually have a shorter intro APR period than other cards — often around six months. Look for balance transfer fees and transfer limits when comparing comparing balance transfer credit cards.
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 a 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 one with the highest interest first. While you might not get the same quick wins as you would with the snowball method, you’ll pay less interest in the long run.
Step 3: Calculate monthly payments to clear your debt
Once you determine the method of paying off your debt that works for you, 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 tells you how many months it will 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. It tells you how much you 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.
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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