College students today are getting into more debt than ever, and it goes far beyond just student loans. Yes, student loans play a big role and can mean racking up tens of thousands of dollars in debt after college, but any students fall into the credit card trap. Credit cards are often pushed and promoted to college students, and with students typically lacking significant income it can make paying off those debts very hard. It could mean those late night pizzas and nights out at the movies could end up costing you thousands in interest long after you’ve graduated college.
Often the excitement and sense of accomplishment that come from finishing your degree and starting out in the occupation of your choice are dulled by the discouraging realization that your student credit card debts and student loans are going to eat up all your disposable income, and then some. It's a real drag to work full-time making a real salary and not be able to afford a decent car, furnishings for your apartment, a quality wardrobe for work, or the latest electronic gadget.
If you rack up $3,000 worth of miscellaneous expenses on your student credit card, it will take you 36 months to pay off the balance if you pay around $100 a month at 10% interest, which is actually very low for college students. That's assuming you never charge another dollar to your credit card. Chances are, you'll have little to show for the money. If you're like many college students, you used your student credit card or some of your student loan money to order pizzas and Chinese take-out, pay for your cell phone charges, buy clothes you didn't really need, and build up your iTunes collection.
If you want to avoid spending a big chunk of your income after you graduate to pay off items that are only a distant memory, here are a few things to consider.
- Don't take a credit card to college unless you're sure you can resist the urge to use it for anything but emergencies or items you can and will pay off at the end of every month. It is tempting to just occasionally charge something you don’t need and tell yourself you’ll pay for it later, but it rarely turns out that way. If you can't pay the balance off when the credit card statement arrives at the end of the month, you'll end up paying even more in interest charges.
- Getting a credit card in college isn’t always a bad idea though. It takes credit to build your credit history and credit score, so if you get one, just be sure you use it responsibly like mentioned above.
- Get a debit card. They're convenient. They give you instant access to your money. They limit your spending to what you actually have in your account. This is a good thing.
- Shop around for the best cell phone deal. Avoid exceeding your free minutes. Calls over and above your allowable minutes are very costly.
- Buy used text books. Who cares if they're not perfect? You can save a substantial amount of money over the course of your college education.
- Skip spring break or vacation close to home. Many students come back broke from spring break, which can cost $1,500 or more. If you work during the summer earning $10 an hour, it will take you a month and a half to net enough money to cover your spring break expenses. That leaves only a month to earn money for the next school year.
- Set up a budget. It not only helps you stay on track, it also gives you a feeling of control and the peace of mind of knowing you have enough money to make it through the school year.
- Find ways to cut expenses. Browse local newspapers for coupons. Limit booze and cigarettes, which are two of the most expensive habits you can have. Find movie theaters that offer reduced prices, or buy movie coupon books that offer discounts. Take advantage of free or inexpensive activities on campus. Limit your purchase of CDs. Plan ahead so you can avoid incurring ATM fees. Leave your car at home and walk whenever possible.
These small sacrifices will pay off big in the long-run, and you won't be part of the college credit crisis.