Getting College Credit … And Paying It Off In Under 30 Days

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Going to college is an important phase in a young person’s life that comes with a great sense of independence, but also much more responsibility. So it’s no surprise that one of the most common times for someone getting their first credit card is during these formative years.

For many cash-strapped fledgling adults, a credit card can be their best friend. It helps resolve financial sticky situations and provides a good starting point in developing the all-mighty credit score. You can use it to buy books, food and even clothes to impress new friends. More importantly, it provides a nice safety net in case of any emergencies.

However, just like any new friend in college, a credit card could also potentially be a bad influence if not watched carefully. If you think procrastinating on studying for finals or writing that term paper is a bad idea, it’s exponentially worse when you’re catching up on credit card debt.

It All Adds Up

Like your class workload, debt can pile up too–and fast. Let’s say, for example, you need a new $100 textbook for class. No problem, just put it on your credit card. You’ll pay it off when you get the money. Then, maybe you need a new outfit for that party on Thursday.

That $50? Charge it to the plastic. What about the smaller expenses? Gas, food, fun, etc. Card, card, card. Out of sight, out of mind. There’s $20 here, $10 there, and so forth. Before you know it, you’ve racked up $300 in debt in a month. Still, $300 seems manageable. But what about next month? And the month after that? That’s $900 in debt before the first semester’s even over!

Don’t Pay To Delay

What’s worse, you get docked for points for not paying off your debt in full after the first 30 days. Many people put off paying down their debt by just making the minimum payments each month, which is usually a set amount or a percentage of the principal owed, whichever is higher of the two. That’s how credit cards make money; they charge interest on the debt you’re floating. Floating debt is essentially money owed. Typically, credit cards give their customers a grace period of 20-30 days. After that, they begin calculating interest after every 30-day billing period.

Let’s say you signed up for a credit card that charges you a 15 percent APR, with monthly minimum payments of $10 or 3 percent, whichever is higher. While only paying $10 a month doesn’t sound too bad, over time, if you opt to slowly chip away at that debt instead of paying it off in full, it will cost you.

In The Long Run

So back to that $300 from your first month. If you choose to take the scenic route, it’d take you over three years to pay off that debt and would cost you an additional $78. That’s almost another text book! It gets worse the higher the principle gets.

For example, let’s bump up the debt to $600. It’d take you almost six and a half years to pay off and would actually cost you almost an additional $300 just in interest alone to float that debt. That’s half the money of what you originally bought with the principle.

So how do you avoid paying more for what you buy? It’s simple. Keep a close watch on how you spend your money and the debt you’re accumulating. More importantly, try not to float debt past 30 days unless it absolutely cannot be avoided. If you don’t, your tuition might not be the most expensive education you’ll be paying for come graduation.