How Can Students Get Out of Credit Card Debt?

Getting your first credit card is an exciting endeavor. But taking on too much debt with it is all too easy. For college students with high spending but low incomes, getting rid of debt can be a challenge. Here are a few steps that can help.

The central theses

• In a recent study, more than 36% of students said they had credit card debt of $ 1,000 or more.
• Working out credit card debt can take longer than getting started.
• Making the largest payment you can afford each month can reduce your debt over time.
• You may also be able to negotiate a lower interest rate or other assistance with your credit card issuer.

Create a personal repayment plan

Your credit card debt doesn’t have to stay in your after college life. While you may have amassed fees that now seem insurmountable, what you need now is a plan of action. By taking into account the current state of your finances and adjusting accordingly, you can begin to reduce your debt.

Take stock of your debt

Nobody likes to read their statements, especially if it’s a loan, credit card, or other form of debt. Unfortunately, you can’t just toss your statements aside. Before you can come up with an amortization plan, you need to take stock of the damage.

First, write down the most important numbers: your outstanding balance, the APR of the card and your minimum monthly deposit. These numbers tell you exactly how much you owe, how much additional interest you will be billed if you leave an active balance on the card, and how much to pay each month to at least keep up to date. You may also want to mark the expected payment date, which shows you how long it would take to pay off the debt if you only paid the monthly minimum – usually a long time. If you have more than one credit card, do this for all of them.

Limit your monthly cash flow

As a college student, you may not have a steady income or a lot of it. That could mean it could take months or years instead of days or weeks to pay off your debts. Don’t let this discourage you.

To stay on track, create a rudimentary budget for yourself. Think about where your money is going in a given month, e.g. B. for gasoline, rent, groceries or other important things. Then count on the things you do for fun. Ask yourself if there is any expense that you could forego in order to have more money to pay off your debt.

Contact your credit card issuer for help

Depending on your situation, you may be able to negotiate with your credit card issuer. You can’t talk your credit down, but you can work out a cheaper interest rate or waive your default interest. This isn’t necessarily a slam dunk, but a 2014 study found that 90% of cardholders surveyed were able to get their late fees waived, while 63% said they could cut their interest rates by simply picking up the phone and explaining their situation . It never hurts to ask.

Consider a balance transfer card

It may seem counter-intuitive to get another card to help fight your debt, but credit cards with good credit transfer deals allow you to transfer your existing balance to a card with low or even 0% interest for a period of time. This way, you can eliminate some or all of the interest you would accrue on the other card and allow you to settle the debt faster. Unfortunately, if you find yourself in serious debt problems, the new issuer may reject your application.

Ways To Reduce Your Credit Card Debt

Even as a college student, you may have more options than you know about reducing your debt.

1. Limit your spending. When preparing your first budget, you may have noticed small costs here and there that you could do without. A media subscription here, a gym membership that you never use there – all of these costs add up. Start by reducing the excess of your spending and using that money towards your monthly credit card payments.
2. Find extra income. A part-time job, be it in the summer months or during school time, brings additional income that you can use at least partially to pay off debts.
3. Pay more than the minimum. Making your required minimum monthly payment will keep you in good standing with the credit card company, but it will do very little to reduce your debt. Plan to pay at least a little more each month if you can – and a lot more if you can afford it.
4. Always pay on time. If you have a credit card, there is one thing you shouldn’t miss out on: you shouldn’t miss any payment. This can affect your creditworthiness as late payments are an important factor in calculating your score.
5. Aim for smaller balances first. If you have more than one credit card, a payback method known as the snowball method can help. It requests that the card with the smallest balance be paid out first, while only the minimum payment is made with the others. Once that card is paid out, move on to the card with the next lower balance and so on on the list. Some people find this method motivating them too, as they can celebrate victories by paying off smaller debts.
6. Or, aim for the card with the highest interest rate. An alternative to the snowball method is the Debt Avalanche, where you start with the card with the highest interest rate. As soon as this card is paid off, switch to the card with the next higher interest rate. This technique can save you a considerable amount of interest if you have the discipline to stick with it.
7. Be patient. Sometimes it seems like you are not moving fast enough in reducing your debt. Remember that while your current debt accumulated quickly, it may take a while to pay off.

Know that you are not alone

Whether your credit card balance is hundreds or thousands of dollars, keep in mind that your situation is far from unique. If you look at the youngest cohort of college students and graduates, credit card debt is also a big part of their lives.

A 2019 study of more than 30,000 college students found that 36% reported having credit card debt of $ 1,000 or more. Another study found that around 49% of Generation Z respondents and 51% of Millennials said they had used up their credit cards at least once.

All of this is to tell you that while your current predicament feels bad right now, you are not the only person staring at credit card debt. Most people will get themselves out of the hole they’re in, and you can, too, with the right plan and sufficient motivation.

source https://collegeeducationnewsllc.com/how-can-students-get-out-of-credit-card-debt/