MCLEAN, Va. (4/22/09)--Credit card debt soared to record levels in 2008 for undergraduate students, now faced with a tough economy and rising college costs.
Young adults accumulated an average of $3,173 in credit card debt attending the nation's colleges and universities in 2008 (usatoday.com April 12). While students may use credit to live beyond their means, a recent study revealed that more than 90% of those carrying plastic charged direct education expenses such as tuition, school supplies, and textbooks (Sallie Mae April 2009).
No matter how credit card debt is accumulated, students are urged to take control of their finances and avoid spiraling further into debt:
Commit to cash. Adding more debt is counterproductive to paying off your credit cards. Commit to stop using credit cards for purchases and use cash instead. If you can't afford to pay for the item with cash, perhaps you can't afford to buy it.
Pay off most expensive debt first. Identify which credit card has the highest APR (annual percentage rate) and pay as much as possible above the minimum payment while maintaining regular payments on other credit card balances. This strategy will reduce the total amount of interest paid over time for all your accounts.
Stay the course. Don't let up as balances and minimum payments begin to shrink. Continue paying as much as you can—more than the minimum payment—for the credit card with the highest APR. Do this and you erase the amount owed on that account faster.
Knock out small debts. Having several small recurring debt payments can add up to a large amount. Pay off installment debts with low balances to free up money for credit card payments and get out of debt faster.
Roll over payments. Once you've paid off the card with the highest APR, use the same amount to increase your payments on the card with the next highest APR. Continue this cycle until all of your credit cards have a zero balance.
For more information, read "Tough Times Series: Gas, Groceries on Credit a Slippery Slope" in Home & Family Finance Resource Center and "Improving Your FICO Score has Benefits" in MoneyMix: Launch Your Life.
courtesy of cuna.org