How to Graduate College without Credit Card Debt

Picture yourself in the not-too-distant future. After years of toiling away in labs and lecture halls you are finally graduating from college. As you walk across that stage in front of friends and family, you're leaving college with worldly knowledge, a degree, and an enormous amount of credit card debt.

According to Nellie Mae, a leading provider of higher education loans, a study of student loan applicants showed 78% of undergrad students, 32% of undergrad students, and 95% of graduate students had mounting credit card debit. Students held an average of three separate credit cards.

You may have seen recent reports and news stories about enormous student credit card debt or worse, you may be experiencing it firsthand! You are not alone. The average credit card debt owed by college students is about $2,700, with close to a quarter of students owing more than $3,000. About 10% owed more than $7,000! How large is your piece of the pie?

Here are some of the top rationalizations for overspending on a credit card.

1. I will use it only for emergencies.
2. I can count on Mom & Dad to help.
3. I can get a 2nd job or 3rd job.
4. I can pay it off when I graduate.

Sound familiar.  Well, if you can eat it, drink it, or wear it, then it's not an emergency.  We all know that we spend the most on those things.  Let’s face it, who is looking for a reason to work a second job.  Oh, carrying both student loan and credit card debt sounds like a good idea, right? In today’s economy the job climate can be rough.  It is very easy to wind up in a situation where an unpaid balance festers and spirals out of control.

For an additional dose of reality, credit card debt affects you financially, emotionally, and educationally. Credit card debt hurts your credit score and may affect your chances of landing a job. It even determines whether you can qualify for an apartment or home loan. I hope that your old bedroom at your parent’s house is still available. Looming debt can lead to depression and possibly even suicide. Debt also affects your ability to pay back your student loans. In fact, some students have to drop out of college to pay off debt.

Paying something on a credit card is better than nothing is. However paying more than the minimum payment is definitely better. Let’s do the math. Shall we. If you have a $1,000 balance and you make a minimum payment of lets say $20 at 12% interest, your payment is eaten by the interest leaving the principle untouched. So, that leaves you paying off the balance in six years. That's two years longer than it takes the average student to graduate. So you can see how not managing your credit card debt can haunt you well after graduation.

Now that you see how this debt can affect you in so many ways. Lets look at how you can protect yourself.

Educate yourself
Boost their financial IQ. Find out how do interest rates work. What happened when you incur late fees? Go to sites like www.youngmoney.com or www.inchargefoundation.org and hsan.org.

Make a budget
Set a budget and follow it closely. Watch how much you're paying on credit.

Be on time
Always pay on time. A single slip-up will place a black mark on your credit record -- and could cause the card issuer to jack up your interest rate to the max.

Keep in touch
Always notify the credit card issuer in the event you must be late on a payment. Remember the card companies want your business for life, so they may be willing to make alternate payment arrangements that won't leave a mark on your credit rating.

Have a low tolerance
If a lender gives you cards with $1,000 or $2,000 limits, that doesn't mean you can afford to carry a $1,000 or $2,000 balance.

Define a purpose
If the card is purely for emergencies use it as such. (A Starbucks Frappacino craving is not an emergency.)

Be an over achiever
One usage of a debt calculator will let you see the grim realities of the amount of extra debt incurred by paying the minimum.

Try a cash diet
Use cash instead of plastic whenever possible.

Brown bag it
Unleash your inner gourmet and make a lunch. Eating at the student union today, a night on the town tomorrow...it all adds up.

Leave the card at home
Keeping your credit cards in your wallet will prevent a nasty surprise at the end of the month and when you graduate.

Give the card the cold shoulder
Freeze it in a large block of ice and store in the freezer

Break up
If you really can’t keep your hands out of the cookie jar, cut the card up.

Fast and easy money can be slow and hard to payback. You need to be card smart! Use credit wisely. Limit the number of cards in your possession. Get real about your spending habits. Pay more than the minimum. Bottom line, take control of your finances. If you don't, you could be fighting your way out of debt longer than it took to fight your way through school.