College student credit card debt is a pretty big problem today, with statistics to prove it. While there are valid reasons to get a credit card while you’re in college (to build a good credit history, for example), it can also be very tempting to treat your card like “free money", but it isn't.
Find out more about college student debt due to credit cards, and learn key tips for dealing with it effectively.
Table of contents
- Average college student credit card debt
- Credit card debt tips
- Expert tip
- My College credit card story
- Alternatives to credit cards in college
- What to do if you have a lot of debt?
- How to handle student loans and credit card debt?
- Can you get through college without credit card debt?
- More articles related to college student debt
- Avoiding credit card debt in college can save you money and stress
Even if credit companies try to entice you with perks like a high credit limit, low interest rates, and credit card rewards, that may not be what ends up happening. Rather than having an abundance of extra cash, the reality may look more like late payments, an annual fee, and a bad credit score.
Average college student credit card debt
The statistics about college students and credit card use aren't pretty.
Things have improved some, as credit card companies can no longer offer merchandise for free to students to encourage card applications, but there are ways around this, like giving out coupons. So, unfortunately, credit cards are still very accessible for college students.
The number of college students that have credit card debt
A survey from U.S. News found that over 46% of the college students who participated in the survey had credit card debt. And credit cards often come with very high-interest rates.
How much credit card debt college students usually have
According to the same U.S. News survey, most college students have $1000 or less in debt. However, some have more.
In fact, 27% admitted that their debt is over $2000.
This can put college students in a bad financial situation before they're even done with school!
College student credit card debt tips
Whether you went on shopping sprees, paid for expensive car repairs, or needed new textbooks, you may still have credit card debt. You’ll need to learn how to manage credit card debt, come up with a plan to pay it off, and not fall into the same trap in the future.
Here are some tips to get out of debt and improve your finances.
1. Forgive yourself for your mistakes
We’ve all made mistakes, and maybe running up a credit bill is one of yours. Or perhaps you failed to plan and had to rely on credit for some important circumstances in your life.
That's ok. You’ve come to realize it. Now it's time to make some changes and figure out how to manage credit card debt.
2. Create a plan to pay off your credit card debt ASAP
No matter how small your income is, you need to plan where your money will go every month. Your plan should include how much to pay towards your debt.
There are different strategies that can work, depending on your situation.
For example, the debt snowball worksheet method is a great approach to paying off multiple credit card balances. But if you only have one card, as I did, focus on paying down as much as you can every month until you are caught up.
As a college student with limited earnings, this may seem overwhelming or impossible. But that’s not true. You CAN reach your goal of living debt free.
3. Build up a bit of savings
A lot of people use credit cards to cover unexpected expenses like repairs or medical bills.
Instead of relying on credit to cover these costs, start saving money in an emergency fund. This will help keep you from accumulating debt after every major event that happens in your life.
Your ultimate end goal should be to never carry a balance over. You also want to have a fully-funded emergency fund of 3 to 6 months of living expenses.
But for now, focus on reaching around $1000 or so in your savings. Or even $500 if that would cover a significant expense for you. If needed, break it up into smaller goals.
Getting a part-time job or trying out passive income ideas for students can help you save this money.
4. Make more money to pay off debt
If you can increase your income, then you'll be able to make more than the minimum monthly payments on your cards. Consider the various ways you can earn some extra cash, such as dog walking or extra hours at your regular job.
If possible, apply everything extra you make towards your debt. After you pay for your expenses, of course.
5. Live below your means
A key step on how to manage credit card debt is to live below your means. Living below your means will prevent you from racking up the average college student credit card debt.
The average credit card debt for college students is roughly $1,000 or less; however, the average credit card debt for the American household is over $17,000! Bad habits are hard to break, so if you can get ahold of your finances now, it will prevent future financial mishaps.
6. Avoid overspending
Another crucial step is to learn how to stop spending money. It’s too easy to reach for that credit card for impulse purchases, and you will end up paying much more than the cost of that new item you bought than you thought.
Let’s say you spend $20 a week on coffee; that equals $1,040 in a year! You could pay off your credit card with that money.
By not dining out as often, learning the basics of grocery shopping on a budget, and purchasing items pre-owned rather than new, you can save money and prevent debt.
7. Don't take on more debt
In addition to making the minimum payments and paying off debt, if possible, don't add to it. Stop using your credit cards, even if there is still money available on them, in order to reduce credit card debt.
Remind yourself that if you use your card today, that's money you have to pay back later. Every time you don't use them, you're helping yourself get out of debt faster.
8. Build a good credit score
Perhaps you are disciplined enough with your spending to have a credit card. If that's the case and you want to start credit building, then make on-time payments for the full amount every time.
If you pay your credit bill in full and keep your card in good standing, it can help you with your finances in the future.
But be sure that you are using it for regular expenses that you pay off each month rather than unnecessary spending. And only do this if you know you won't go into debt.
Even if you feel like your credit card debt is huge and you have a lot to do, just get started. The time will pass quicker than you think, and once you're able to pay off a bit of debt, you'll start to feel better right away. You'll also learn good financial habits as you go through this process.
My college student credit card story
Like many people, I've made quite a number of bad financial decisions. And getting into credit card debt as a young college student was one of them. I actually surpassed the average credit card debt for college students.
At the time that I was in college, every major event or job fair always seemed to have an agent (of financial destruction) from the credit company. They would have a booth set up decorated with balloons, offering free t-shirts and pens if you signed up for a credit card.
I remember being lured over to one such booth where the lady told me I could get up to $2,500. All I had to do was fill out this one form, and I wouldn't have to pay the money back anytime soon.
Plus, I'd get this amazing t-shirt with the credit card company's branding on it. (To wear where, though?)
I was about 18 or 19 at the time, away from home with a part-time job on campus that paid me $116 every two weeks. It was the only job I was allowed to have as an international student.
Fortunately, my mother supported me by paying my tuition and rent. Still, my responsibilities were paying my phone bill, buying my own groceries with the cheapest grocery list, and taking care of my other personal needs.
So I paid my phone bill (~$30) each month and bought enough Coca-Cola and Ramen noodles (~$40) to survive every two weeks. (How I survived on this hideous diet, I do not know.)
How I got my first credit card
I found myself calling home to tell my mother about the "basically free" money I was being offered at school. Her response? "What could you possibly need in your life that you need to buy on credit?" She had a point.
Well, the next fair came around with another booth and another agent. Again I was lured over by the freebies and supposedly free money.
I explained to them my mother didn't think it was a good idea. They said, ‘But your mother never has to know. We'll send your statement directly to your on-campus address.’
And with that, I immediately signed up and was approved for a credit line of $2,000.
Blowing my entire credit card balance
I cannot, for the life of me, tell you what I spent that $2,000 on. I can, however, tell you I maxed out that card very quickly.
When I received my first statement a few weeks later, I was perplexed. 24.99% interest on what?
I had sleepless nights thinking about my newly acquired debt and the fact that I didn't have a clue how to get out of credit card debt. I couldn't seem to figure out how to stop worrying about money.
In the end, I had to tell my mother what I had done (before she found out). Of course, I received the appropriate scolding.
Then I used my meager savings (and by meager, I mean around $75) and the money I was earning at my student job to pay the debt off and the hideous interest it had accumulated.
The effects of debt
As little as the $2,000 seems now, thinking about it every day caused me a lot of stress, and it took me several months to pay it off, but I certainly learned a worthwhile lesson about how to manage credit card debt.
At the end of it all, I ended up paying back the $2,000 plus 24.99% compounded interest, which was way more than anything I purchased on the credit card.
Moral of this story: College student credit card debt sucks if you don't have the means to pay it off in its entirety each month.
Alternatives to credit cards in college
There are many other ways to pay for your expenses and extra things you want while in college. Rather than turning to credit cards, try these ideas:
If you want to avoid dealing with debt, you could take on a part-time job or try out some unique side hustles while you're in school. A job can help cover your living expenses and the extra things you want without dealing with a credit card bill.
Plus, getting a job now is great practice for after graduation, when you'll likely work a full-time job.
Rather than worry about credit card payments and late fees, you could simply not open a credit card account. Yes, it may mean waiting on some purchases or finding other ways to pay for necessities, such as working more hours, but on the bright side, you won't have debt.
Better spending habits
Rather than fall victim to credit cards, simply be conscious of your spending habits and avoid impulse spending. Create a budget each month, even if you don't have much to spend.
Know how much your bills cost, how to pay them, and don't spend money that you don't have.
What to do if you have a lot of debt?
The best way to approach a large amount of debt is to first know all the facts. How much do you owe, when is each payment due, etc?
From there, take some time to consider how you can pay it off, whether that means working extra hours or cutting back on your budget.
How to handle student loans and credit card debt?
When you have both loans and credit card debt, a good thing to do is to focus on when you need to pay them. If you are still enrolled in college and your student loans aren't due yet, then focus on your credit card debt while you're still in school. Then you can get more advice about student loans and tackle them when you graduate.
Can you get through college without credit card debt?
Although it may seem impossible, yes, you can get through college without becoming part of the average college student credit card debt situation. Simply refuse to open a credit card, pay for things with cash, and work a side hustle or more hours to afford things rather than going into debt.
More articles related to college student debt
Avoiding credit card debt in college can save you money and stress
When it comes to your personal finances, ignorance is not bliss. It comes back to bite you eventually. Educate yourself about all your current debt, know the interest rates, and learn how to manage credit card debt.