7 Tips To Avoid Student Credit Card Debt
A college education is becoming more and more expensive as time progresses. With student loans becoming a major debt crisis for many, the added problems from student credit card debt will only compound the headaches and financial problems in the years that follow graduation. However, a student credit card still provides a decent means of building good credit. If you're lucky enough to be approved for a new shiny piece of plastic, here are 7 tips to help you avoid student credit card debt while you're still in college:
1. Eliminate Unnecessary Expenses
Whether you're saving your receipts, or going down your monthly statements, highlight any unnecessary expenses. If you're having trouble determining what constitutes an unnecessary expense, here's a list of commonly overlooked items:
- Expensive coffee purchases: invest in a thermos and start brewing your own stuff at home.
- Energy drinks: waste of money and potentially bad for you. Drink more of that homebrewed coffee.
- Magazines: just spend time reading magazines in a bookstore or online.
- Expensive clothing: in college, you only need clothing to cover your naked body and keep you warm. New, fashionable clothing items are a luxury outside of your spending limits.
- Dry cleaning: if you have no more expensive clothing to deal with, you shouldn't have anything to dry clean. That's two birds with one stone!
- Movies: it's cheaper to rent a DVD, and besides, you should be studying more.
- Satellite or cable TV: again, you should be studying.
- Video games: should still be studying.
- Expensive grooming products: taking care of your body and appearance is important, but if you have to resort to your student credit card, you probably shouldn't buy it.
- Dining out: food is a necessary expense, but it becomes an unnecessary one when it has to be served to you in a sit-down restaurant.
2. Create a Monthly Budget
Now that you've eliminated any unnecessary expenses, create a monthly budget that includes necessary expenses, like housing, utility bills, food, gas, insurance, book fees, school supplies and parking permits. Once you've created a list of necessary expenses, determine what you can afford on your own, and where you might require some assistance from a student credit card. Only use your student credit for any of these expenses if you have absolutely no other option.
3. Save the Credit Card for Emergencies
Your student credit card can be looked at as a last resort for making an emergency payment. No, an emergency expense does not include a trip to the movie theater or a $6 cup of coffee. Plan on using the credit card for dire emergencies, like:
- Unexpected car repairs
- Prescription medicine, hospital visits, copay and other medical related expenses
- Emergency housing repairs
- Any bills that charge hefty penalties for late payments
- Miscellaneous fines, like a parking ticket
4. Avoid Paying the Monthly Minimum
Don't get suckered into paying only the monthly minimum. If you do, you'll only end up paying the interest owed, leaving you in a perpetual state of credit card debt. If your student credit card debt is at a point where it is almost unmanageable, make it a part of your necessary expenses. Set aside a certain amount of money in your monthly budget that's more than the minimum payment required, and start paying down your debt gradually.
5. Pay the Highest Debt First
If, for whatever reason, you have more than one student credit card, start climbing your way out of debt by paying off the card with the highest interest first, and the minimum payment on the others. Once you've taken care of the student credit card with the highest interest, start working on paying back the next card. Once all your student credit cards are paid off, stash your plastic and only use it for emergencies.
6. Allow Your Parents to Be Your Co-Signers
While some students may be opposed to allowing their parents to be their co-signers on a student credit card, it can actually help keep them out of trouble, especially when Mom or Dad are allowed to look at their monthly statement. With the Credit CARD act of 2009, it's difficult for students to even obtain a credit card without a co-signer, unless they have proof of adequate income. Having a parent as a co-signer on a student credit card can be viewed as a safety net, so take advantage of the opportunity if your parents are willing.
7. Track Your Credit Card Payments and Expenses
Invest in a dry-erase board, and record your student credit card expenses, and how much you owe on a monthly basis. Hang the dry-erase board somewhere you have to see it every day, like on your refrigerator. This allows you to have a constant, visual reminder to help you manage your credit card debt.