Student loans are no longer the first credit experience for a freshman in college. Instead, they get a credit card. From a sample of 100 sophomores, more than 90% had at least one college credit card. The question is why so many college students end up in a cycle of debt because of their credit cards? Why do so many students find it hard to believe that their monthly bills are so high? Most importantly, does it have to be this way for a college student who uses a credit card, or is there an easier way?
There are a lot of signs in the numbers that show that students often run up credit card bills but don't pay their monthly bills on time. About 21% of college students who use credit cards have balances of between $3,000 and $7,000. The average student keeps getting more and more credit cards, which could mean that they are getting new cards to pay off balances on old ones. But this can cause credit balances to grow even faster, putting people in a never-ending cycle of debt.
Five Ways to Avoid Getting Stuck with College Credit Card Debt
The main reason for this sad situation is that people don't use credit in a disciplined and planned way. If you are a college student and want to get the most out of your credit cards, use the following tips to plan how you will spend your credit:
- Pay when it's due. Late fees are the most pointless way that debt builds up. Make sure you always pay at least the minimum on your bill. If you want to pay less overall, you should try to pay more than the minimum amount.
- Follow the "20/10 rule." Make sure you never, ever borrow more than 20% of your annual net income and that your monthly payments don't cost more than 10% of your monthly income. In other words, keep your credit in balance so that your monthly payments don't get messed up.
- Plan your credit expenses. When you have a college credit card, it's easy to give in to the urge to buy something on the spot. This causes card balances to go up and payments to go up and up over a long time. It is ALWAYS better to plan purchases on your college credit card so that you only build up balances you know you can easily pay off.
Don't get cash advances. Most of the time, the interest rates on these are higher than if you bought something on credit.
- Don't get close to your credit limit. There may be a reason why you have to pay for something you didn't plan on. So, in general, if you don't go over your credit limit by making charges that aren't necessary, you can feel good knowing that you can use credit when it's really needed.
How College Credit Cards Help or Hurt
If you keep these tips in mind, you should be able to get by with a college student credit card. These tips are especially helpful if you're thinking about taking on a second job to pay off your credit card debt. Your savings are valuable, so don't let yourself get into a situation where you need them to get out of debt. The best way to keep track of all your costs is to have a budget that is balanced. College credit cards are definitely a good thing, but if you're not careful, they can also be a bad thing.
