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Yes, I know this doesn't have much to do with student leadership, but the sad fact is that way too many student leaders are doing great things for their campus organizations and are quietly running up huge balances on their credit cards. With so many demands on your time, thinking about the financial hole you are digging takes a back seat to a quick meal charged at midnight to your Visa.
OK, so the average American has $9,900 in credit card debt right now, according to Bankrate.com. The average interest rate people are paying right now is around 14.5%. If you have more than this amount in credit card debt, or if you are paying a higher interest rate, you are on the wrong side of the average and you need to do something about it. Now.
First thing you need to do is to call the customer service number on the back of your credit card, find out what interest rate you are paying, and ask for a lower one. Tell them that you are going to move your balance to a card with a lower interest rate unless they can lower yours. If you have very good credit (a score of 700 or better) you should be closer to 10%.
If this doesn't work (and frequently, it doesn't), then start shopping for a credit card that has a lower interest rate, apply for it, and move your balances there. Right now, American Express is marketing a card (I think it's called the "clear card") that has a 2.9% interest rate for a year on any balances transferred. (Of course, if you're late on a payment, they boost the interest rate to 25%, so be very careful for these important details).
Sadly, credit cards are a reality for many students, but there's no reason to be passive about it. If you are still using that very first credit card you got with the terrible interest rate, it's time to switch. Also, if you are carrying balances on several cards, consolidate into one card, and make larger payments each month to one card issuer. This should allow you to earn a lower interest rate.
Some other basic credit card advice:
Don't carry your credit card around with you. Leave it at home in a safe place. When the credit card is not within easy reach, it tends to get used for fewer stupid, impulsive purchases. If you must carry a card, carry a debit card so that you aren't running up debt.
Never allow yourself to charge anything under $20. If you don't have cash for these tiny purchases, you shouldn't be making them.
Don't save your credit card information on any websites. They all give you the option of storing your credit card for your next online visit. Don't do it. Those extra minutes having to enter in your card information might be what gives you time to question the necessity of the purchase.
Always make your payments on time. This is the easiest way to keep your credit score at a good place. This might not be important to you now, but when you're trying to buy that condo or get that new car loan in a couple of years, it's going to make a huge difference.
Never get a cash advance from a credit card. Those interest rates are horrible. It's just stupid. You might as well be going to one of those paycheck advance places. Total rip off.
Those minimum payments you see on your bill are your ENEMY. You should always pay at least TRIPLE that amount. No kidding. Sorry if that depresses you. Triple, triple, triple.
Whenever you charge something, get the receipt, and post it in your room. Put it on a bulletin board, tape it to your bed's headboard. Seeing those receipts add up will slow down your spending.
Beware credit counseling services. They really should be a last resort for people who are in deep, deep trouble. If you use one, make sure it's a HUD certified agency. And remember, if you go down that road, you cannot change your mind. If you have a rich uncle who can bail you out and set you on a repayment plan, that's a much better way to go, even if it's a bit embarrassing.
And, to conclude, here's the very best tip I can give you. Only spend paper money. No credit cards, only paper. And then, save all the change you accumulate each day. You will save about $30 a month this way, and put it into an account somewhere. You're never too young to get a basic mutual fund, and $30 monthly deposits will add up nicely. More tips at ChoosetoSave.org.
