College Student Credit Card Debt
College student credit card debt is a growing problem for students across the country. As educational costs continue to rise, more and more students find themselves having to charge their school expenses, only to find themselves with an ever-increasing college student credit card debt that must be paid off. Recently, college student credit card debt has soared to all time highs, in line with rising educational costs.
The average undergraduate carried a college credit card debt of $3,173 in 2008, according to college-financing company Sallie Mae. The average student in 2008 graduated with a college student credit card debt of $4,138. This amount is an increase of 44% from studies in 2004.
Many students begin accumulating college student credit card debt from their first day of school. And, that amount continues to rise every year. Tuition and related school fees at public colleges and universities have risen almost 50% over the last 10 years. While education costs keep on increasing, many banks and private lenders are cutting back on loans. This puts many students in the unfortunate position of having to charge many of their school expenses. If a student does not qualify for private or government loans for their education, they often have to resort to credit cards to pay for their schooling. The result is increasing college student credit card debt.
Even though these amounts do not seem to be high at first, the longer it takes a student or recent graduate to pay off their college student credit card debt, the more interest, late fees and over the limit fees will be added to the original amount. For instance, if a student pays the monthly minimum on a college student credit card debt of just $1,000, it will take 12 years before that debt is paid off! At an 18% annual percentage rate, an additional $1,115 in just interest charges will be added to the original college student credit card debt. If the student falls behind in their payments, there are additional late fees that are tacked onto that original $1,000 college student credit card debt.
Each year of college, students add more charges to their college student credit card debt. Even if a student only charges books and school supplies on their credit cards, these charges quickly add up. In 2008, on average, students added $2,200 onto their college student credit card debt.
Unfortunately, many students are having to learn about finances the hard way. After graduation, they are saddled with high levels of college student credit card debt that must be paid off. However, they often end up having to take jobs for smaller salaries than they expected. They have to find ways to deal with higher living expenses than expected, and they often also have student loans that need to be paid off, in addition to their already existing college student credit card debt.
It can take years to pay off their college student credit card debt and all of the high interest tacked onto it. College student credit card debt can follow graduates for years – often into their 30s and 40’s. They end up struggling to pay down amount that seemed small at first, but keep growing with added fees and interest. Many graduates find themselves burdened with college student credit card debt for many years longer than they anticipated.
High college student credit card debt can cause financial difficulties late in life, making it hard to be able to repay student loans. Also, the longer it takes to repay high college student credit card debt, the harder it can be to eventually be extended other credit, including loans to buy a home or car.
It is important that students learn to develop good spending habits from the very start so that they do not fall into the trap of college student credit card debt that will take them years to pay off. The best way to do this is to watch what is charged in the first place. It is best to have just one credit card with a low interest rate that is only used when absolutely necessary. Most importantly, they must get into the habit of paying off their college student credit card debt regularly and on time. By keeping outstanding balances low, or better yet, paid off completely every month, students will avoid incurring spiraling college student credit card debt.
No matter how hard they try, there are students that will end up with mounting college student credit card debt. Wanting to make the most of their college years, they look at a credit card as free money, or money that they will repay later on. The end result for them is that they discover they have college student credit card debt that keeps growing, even if they are paying the minimum amount due each month. The longer it takes them to pay off their college student credit card debt, the more they will end up paying in the long run.
There are many students, 54% in fact, who manage to pay off their college student credit card debt every month. By doing this, they will not be graduating with a heavy college student credit card debt to have to worry about as they start their new careers. These students have learned to manage their finances well.
To help students from getting into large amounts of college student credit card debt, there are some tips that they should keep in mind when using their credit cards. First of all, parents should talk to their children when they are young about managing their money. If they learn early in life how to spend wisely, they will generally not get into large amounts of college student credit card debt later on. With the right information and guidance, students will be able to establish good credit and stay out of the college student credit card debt trap. To help students learn how to avoid running up large amounts of college student credit card debt, the major credit card companies have web sites specifically designed for students with information on managing their finances. Financial know-how is a learned skill that it is important to master in order to stay out of college student credit card debt.
It is important that students learn to make a monthly budget, and stick to it. Included in the budget has to be regular credit card payments so that they can stay out of massive college student credit card debt during their school years. Keeping track of monthly bills as they come is vital to being able to adjust spending when necessary in order to make sure credit cards are paid off on time. In general, students should budget 10% of their net monthly income to go towards repaying loans and college student credit card debt. That means, if monthly income is $1,000, then $100 of that amount should go to paying off debts, including credit cards. Budgeting is the way to plan ahead so that if an emergency arises, they will be able to cope financially, and their credit history will still remain strong.
Establishing a credit history first of all requires using the credit that is extended. The way that students handle their bank accounts and credit cards will affect their credit history and credit rating. If they get into deep college student credit card debt that they are not able to easily repay, this can adversely affect their credit worthiness. Due dates and payment agreements must be met, or a student’s credit rating will drop.
Reading and understanding credit card statements is a vital part of being financially responsible and not running up huge amounts of college student credit card debt. Based on your income and past credit history, the credit limit on a credit card is the maximum amount that a bank or credit card company is prepared to lend you. Students often see their credit card maximum as their spending limit. This can lead to them charging too many things and amassing overwhelming amounts of college student credit card debt. It’s best to have some of the available credit set aside in case of an emergency. Also, by charging more than the maximum amount on a credit card can lead to additional fees or penalties, or even possibly having an account closed or frozen until it is paid off.
Due dates listed on credit card statements are important to make note of as they arrive. If the credit card company or bank receives payment after that date, it is considered late. Late payments usually incur additional penalties and finance charges, which can often be quite hefty amounts added onto the outstanding balance. For students, these late fees can quickly add up and cause college student credit card debt to mount up over a relatively short period of time. Many students do not know that if their monthly bills are normally due at a time of month when finances are already stretched to their limit, for instance just before payday, they can call the credit company and request that the due date be changed. In this way, the billing cycle can be adjusted to better match their income flow. This is yet another way that students can be financially responsible and avoid adding late charges to their existing college student credit card debt.
Credit card statements list what is the minimum payment that will be accepted each month. These amounts may change each month, depending on new charges, past payments, late fees and other penalties. Card holders should be prepared to pay at least the minimum amount each month, and pay it on time. If large purchases are planned in the future, it is necessary to pay more than the minimum amount in order to being the outstanding balance down lower before adding new charges to the credit card. For students, in particular, this is an important step in keeping down the amount of their college student credit card debt, and paying it off as soon as possible.
It is important to keep in touch with credit card companies and other lending companies whenever an address, name or job changes. In fact, these companies should be notified as soon as possible of the upcoming changes. It is best to notify credit companies of changes ahead of time if at all possible, rather than waiting until after the fact. For instance, before moving to a new home, credit card companies should be notified of the planned move so that bills are not delayed by being forwarded from the old address to the new one through the post office. This takes extra time, and if the monthly statement arrives late because the company was not notified ahead of the move, then the payment may arrive late, which will accrue late fees and other penalties. By planning ahead and notifying credit card and lending companies early, additional late fees and penalties can be avoided on college student credit card debt.
If there is a legitimate reason that a student cannot make a payment on time, they need to contact the credit card or lending institution as soon as they can. Once they know about extenuating circumstances or emergencies, most companies will work with the individuals to create a repayment plan that better fits their personal needs. By making new arrangements, credit history can remain intact. This is yet another way to avoid unnecessary fees and penalties from being added on to the existing balance of college student credit card debt.