How to get in trouble with credit card debt
■ Tim Ballard / Contributed
Students can get into trouble with credit card debt if they don’t take time to think about what they’re doing, according to KHEAA.
One quick way to get into trouble is to carry a high balance and pay only the minimum payment each month.
If you have a $1,500 balance, your minimum payment might be $30 a month, since many credit card companies set the minimum payment at two percent of the balance. Let’s say your card carries a 22 percent interest rate. If you only pay $30 a month and don’t charge anything else until you pay off the entire balance, it will take you more than 11 years to pay your balance down to zero — and you’ll pay $2,600 in interest.
It’s worse, of course, if you pay the $30 and turn around and charge another $30.
That circle is especially bad for students. Many college officials say more students drop out because they have to go to work to pay off their credit cards than because they flunk out.
Before using your credit card, ask yourself if you really need what you’re buying and if you can afford it. If you can’t pay off the entire balance, pay as much as you can and not just the minimum.
KHEAA is a public, non-profit agency established in 1966 to improve students’ access to college. It provides information about financial aid and financial literacy at no cost to students and parents. KHEAA also helps colleges manage their student loan default rates and verify information submitted on the Free Application for Federal Student Aid (FAFSA). To learn more about those services, visit www.kheaa.com.
In addition, KHEAA disburses private Advantage Education Loans on behalf of its sister agency, KHESLC. For more information about Advantage Education Loans, visit www.advantageeducationloan.com.