Students often leave college with more than £30,000 debt from loans and credit cards. This might seem overwhelming but there are plenty of ways to pay off credit cards. Here are a few practical tips students can use to manage their credit card debts like a pro.
1. Negotiate with your creditors: Contact your creditors and negotiate with them for a lower interest rate on your credit cards. If you have always made the minimum payments on your credit cards each month, then they might agree to reduce your interest rate. Explain your financial condition to your creditors. You’re a student. You are not earning that much. You are not doing a full-time job. So it is difficult for you to pay high-interest rate on a credit card.
2. Create a budget plan: You have to follow a budget if you’re serious about paying off your credit card debts. Use an online budget calculator to track your expenses. You’re in debt due to your overspending habits. You need to change that. You have to spend less than what you earn. You have to save more.
A smart budget shows you the areas where you need to cut down your expenses. It helps you save money and make additional payments on your credit cards.
Use your student identity card to take advantage of discounts wherever you can. This can help you save even more money. You can use it to get out of credit card debt fast.
3. Enroll in a DMP: A debt management plan helps you pay off your debts in full. In this debt relief plan, you pay a small amount to your creditors every month. The debt management company negotiates with creditors on your behalf and arranges an repayment plan for you in exchange for a fee. So before you enroll in a DMP, ask yourself 3 vital questions:
Can I pay a fee to the debt management company?
Can I make monthly payments on a regular basis?
Is the company legal? Is it an authorized company?
If you haven’t got a job, then I would advise you to get one as soon as possible. At least, get a part-time job so that you can earn some extra bucks.
4. Increase your income: Do you have any special talent? You must be good at something, You can use that skill to earn money. If you’re good at writing, then you write articles for different websites and earn a few extra bucks. Use it to pay off your credit card debts.
A word of wisdom
Honestly speaking, credit cards can help you save money in various ways. There are plenty of cards that give you 1%-2% cash back on your purchases. Then there are sign-up bonuses, free checked bags, 0% introductory rates, extended warranties, and so on. But most students don’t use these rewards properly, and hence get into debt.
Tip to avoid credit card debt as a student
Isn’t it better to avoid credit card debt altogether? Just think if you don’t have credit card debt, you won’t get collection calls. You won’t have to spend sleepless nights worrying about your debts. Your credit score won’t go down. Just think about the multiple benefits of avoiding debts.
Here are a few tips to avoid credit card debt as a student.
1. Pay more than the minimum: The minimum amount you have to pay on credit cards is usually quite a small amount. But paying only the small amount every month is a big financial mistake. You could end up paying more in interest than the actual debt in the long run.
When you don’t pay the full balance, your card issuer is likely to charge interest on everything you buy this month.
2. Pay your credit card bills on time: Pay your credit card bills on time. A late payment fee can be as much as £12. Plus, you have to pay interest on the total amount you owe. If you make late payments every month, your card provider can hike your interest rate, lower your credit card limit and even terminate your account.
Late payments drop your credit score. This makes it hard to to qualify for a new credit card, a home loan or a personal loan.
The best way to avoid late payments is to pay by Direct Debit where money goes out of your bank automatically each month. You won’t forget the due date by any chance.
3. Stay within your credit limit: Don’t cross your credit limit since that would affect your financial life badly. Your card issuer would charge you an extra £12 fee. Plus, your credit score would drop too. You can request your card provider to increase your credit limit if it’s too small. But you should do it only under the following circumstances:
You can pay the higher amount easily
You won’t overspend every month
You have made monthly payments on time in the last 3-4 months
4. Check your credit card bills: I know you’re busy with your studies. I know you’re busy with parties and your friends. But even if you’re too busy, spare some time for your credit card statements. Check your credit card statements before the payment date is due. Find out if there is any transaction you don’t recognize. Look at your credit card receipts and match things up. If there is any discrepancy, contact your card issuer immediately. If you have been a victim of credit card theft, then you shouldn’t pay for it.
Delinquent credit card accounts hurt your credit rating. This can stop you from qualifying for a credit card at a low-interest rate.
Try to pay off your credit cards before leaving the college or university. Check your credit card bill statements every year and pay the full balance each month.