Looking at Credit Card Debt after Graduating from Student Credit Cards
Studies have shown that the majority of credit card students graduate with at least one credit card in their name, and graduate with more than $2,800 in credit card debt according to Nellie Mae. Whether the card was used to pay tuition and books, or more frivolously for a night on the town doesn’t matter – you’ll be paying for these purchases for years to come if you only pay the minimum payment each month.
When you graduate from college, it’s time to take a look at your financial situation and for many this means taking a closer look at credit card debt. This debt is the last thing you want to be dealing with as you are looking to start your career and “adult” life.
Transfer Your High Interest Balances
Student credit cards are known for having some of the highest interest rates in the industry. The cards you carried in your wallet as you walked around campus may not be the kind of credit cards you use as a college graduate. It’s time to graduate your student credit cards to grown-up versions, and you can often do this through a credit card balance transfer offer.
Move your high interest credit card debt to a 0% credit card and make paying it off a priority. You’ll probably save hundreds of dollars in interest compared to paying the minimum payment on a high interest credit card.
Don’t Close Your College Credit Cards
It may seem like a good idea to close your college credit cards once you move the balances to the best credit card offer you can qualify for – but refrain from closing them! These cards represent your oldest source of credit history, which is important in the calculation of your credit score. Additionally, if you close older cards, you reduce the amount of your available credit which gives you a larger percentage of debt in relation to credit available – another ding to your credit score.
Unless your credit cards are charging you a high annual fee, or an inactivity fee, don’t close them.
Finance Tips for Grads
It is important to concentrate on paying your college credit card debt off before you consider using additional credit. Once you’ve got your debt paid off, if you consider using a credit card make sure you plan to pay it off in full each month when the statement arrives.
Avoid taking cash advances, as they generally charge higher interest rates and massive additional fees.
If you know you’re a responsible credit card user, consider a rewards credit card that will offer you cash back, like the BankAmericard Visa, or a No Hassle Rewards card from Capital One. Just remember that if you don’t pay your credit card in full, you’ll end up spending more in interest than you’ll earn in rewards.
