Student Credit Card and Credit Education Blog

So, you’re in school and having a great time. Studying hard and still enjoying the weekends. (Un)fortunately, a huge mall is very close to your dorm, and the school has graciously provided a shuttle to whisk you there on Saturday afternoons. All the best stores are there and you’ve recently signed up for a credit card specifically for college students, which happens to be burning a hole in your wallet.

Before you know it, those three new shirts, two jeans, six CDs, and the latest Seinfeld DVD all appear on your most recent credit card statement. And you don’t have any way to pay for it.

This is why credit card companies pitch so hard to college students. They are hoping that the above situation takes place as often as possible. Sure, your $455.09 bill may not seem like a lot, but if you were to put off paying it for, say, 5 years. Here’s the numbers you’d be looking at:

Assuming your annual percentage yield (APY) is 22%.
After Year 1: $555.21
After Year 2: $677.36
After Year 3: $826.37
After Year 4: $1,008.18
After Year 5: $1,229.98

Scary stuff. So, do what you can to pay it back. Are you simultaneously adding money to a savings account while you have credit card debt? Stop. Right now. Take all the money from your savings account (which is earning 5% at best) and apply it to your credit card balance. You’ll essentially be saving significantly more by eliminating that 22% APY debt.

Alternatively (if you haven’t already), you can take out a federal student loan, which not only has a much lower interest rate, but the interest is also tax-deductible. Even a private student loan is a better option. It does have a higher interest rate, but it is still half of what your Visa hits you with.

Whatever you do - keep that credit card debt as low as possible!