Credit card debt does not have to last forever. Especially if it is dealt with early.
It’s exciting to get your first credit card. It is easy to get too much debt from it. College students who have high-spending college students, but low incomes can find it difficult to get out of debt. These steps can help.
KEY TAKEAWAYS
- In a recent study, more than 36% of students said that they had credit card debts of at least $1,000.
- It can be more difficult to get out of credit card debt than it was to start with.
- You can reduce your debt by making the highest monthly payment that you can afford.
- Your credit card issuer may be willing to negotiate a lower interest rate, or any other assistance.
Set up a personal repayment plan
Credit card debt does not have to stay with you after graduation. Although you might feel overwhelmed by the amount of credit card debt you have accrued, you can start to put together a plan. You can start reducing the amount you owe by taking stock of your financial situation and making adjustments accordingly.
Take stock of your debt
Nobody likes to look at their bills, especially if they are related to a loan or credit card. You can’t simply ignore your statements. Before you can create a repayment plan, you will need to assess the extent of the damage.
Start by taking note of the key figures: the outstanding balance, your monthly minimum payment , and the annual percent rate (APR). These figures will tell you how much money you owe and what interest you will be charged if you have an active balance.
As an indicator of how much debt you have, it can be helpful to calculate the amount required to repay the debt in three years. The estimated payoff date can be lowered to show how long it will take to repay the debt. This is usually a long time. Do this for each credit card you have.
Get your monthly cash flow under control
You may not have a steady or substantial income as a college student. This could mean that it may take you months, years, or even weeks to repay your debt. This should not discourage you.
Make a basic budget to help you stay on track. You should consider where your money goes each month. For example, gas, rent or groceries. Next, consider what you do for pleasure. Consider whether there are any expenses that you can cut out to make more money for your debts.
Ask Your Credit Card Issuer for Help
You may be able negotiate with your credit card company depending on your circumstances. Although you won’t be allowed to reduce your balance, you may be able negotiate a better interest rate or waive late fees. Although this isn’t a guarantee, 84% of those surveyed said they were able get their late fees waived and 56% said that they were able reduce their interest rates. 1
You might consider a Balance Transfer card
Although it may seem counterintuitive, credit cards that offer good balance transfers options allow you to transfer your existing debt to a card with a lower or even 0% interest rate for a set period. This will allow you to eliminate interest that you were paying on the other card and make it easier for you to pay off the debt faster. If you are in severe debt, the new issuer might decline your application.
There are ways to reduce your credit card debt
You may not realize how many options you have for reducing your debt as a college student.
- Reduce your spending. You may have overlooked small expenses that you can live without when you were creating your budget. All of these expenses add up, whether it’s a media subscription or a gym membership that you don’t use. Reduce your spending by cutting back on unnecessary purchases and transferring that money to your monthly credit cards payments.
- Additional income is possible. Part-time work, whether during the school year or in summer, can provide additional income that you could use to repay debts.
- Do not pay more than the minimum. While making the minimum monthly payment will help you maintain good standing with your credit card company, it won’t reduce your debt. You should plan to pay at most a little more each month than you can afford, and a lot more when you have the funds.
- Pay on time. Pay on time is the most important thing to remember about credit cards. Late payments can have a devastating effect on your credit score .
- Prioritize smaller balances. The Snowball Method is a method of repaying multiple credit cards. The Snowball Method requires that you pay off the lowest balance card first and make the minimum payments on all others. After that card is paid off you can move on to the next lowest balance. This method can be a motivator for some people, as they get to celebrate victories in paying down smaller debts.
- You can also target the card that has the highest interest rate. The Debt Avalanche is an alternative to the Snowball Method. It allows you to start with the highest interest card. After that card is paid off you can move on to the next one with a higher interest rate. If you are disciplined enough to stick with the plan, this technique can help you save a lot of interest.
- Be patient. Sometimes it can seem that you are not making enough progress in reducing your debt. It’s possible to accumulate debt quickly but it could take some time to repay.
- You can sell items that you don’t need or use. You can sell your items on eBay or at a garage sale. You can get rid of books, clothes, and other items from previous semesters. There may be an old tablet or phone that you have lying around. You can turn your unwanted items into cash and use the proceeds to pay a higher amount.
- Do not carry your credit card around with you. Students can have a separate card to use for emergency purchases and for more serious purchases, such as a flight home for the holidays or books for courses that you don’t intend on taking. It can be tempting to carry it around and pull it out at the cash register, or after a night of drinking and dining. You can make it difficult to reach the card to control your impulses.
Be aware that you are not alone
Your credit card debts may be in the thousands or hundreds of thousands. But, it is not unusual. Credit card debt is a significant part of the lives of recent college graduates.
3 A 2019 survey of over 30,000 college students revealed that 36% of them had $1,000 in credit card debt. 2 Another study showed that 43% of Gen Z respondents, and 51% of millennials, reported that they have maxed out their credit cards at some point. 3
This is all to say that, while you may feel terrible right now because of your credit card debt, you are not the only one in this situation. With the right plan, enough motivation and the right strategy, most people can get out of the financial hole they are in.
