What Every Grad Should Know to Avoid Credit Card DebtJun 18, 2018
Credit card debt is one of the highest interest rate debts there is. And a recent report shows that Gen Zers are accumulating credit card debt at a higher rate than other groups. 80 per cent of Gen Z debt is on credit cards.
New grads often have a lot of competing financial responsibilities. Student loans, lines of credit and credit card debt can make it hard to launch, and hard to make ends meet.
This podcast looks at four things every new graduate should know about debt. Our Licensed Insolvency Trustees (LITs) discuss planning your debt repayment plan and offer strategies for sticking to it, how to find debt relief options if you can’t make ends meet and how to prioritize debt repayment.
Let’s expand a bit on what Doug Jones (LIT from our Barrie office) discussed in the podcast: what strategies to use to avoid credit card debt problems.
Make your credit card the exception, not the rule
Credit cards should not be your go-to form of payment — especially if you’re using your cards as a borrowing tool.
It’s tempting to pull out your credit card when you feel there are necessities like a cell phone or interview/job clothes — or even when you’re setting up a new apartment. But those costs — and that interest — can really add up quickly.
Err on the side of caution
Know your credit limit and your personal spending limit.
How much you spend, and in this case charge, should depend on your financial situation. Remember that consumer debt is never good debt. Borrowing on your high-interest credit card to pay for non-essentials will only make your finances worse.
Don’t open too many credit cards. It can be difficult to keep track of your debt if you have several cards in use at once.
And, as Doug advises in this podcast episode, opening multiple credit cards can signal to the credit reporting agencies that you’re having trouble controlling your spending or your debt — which can negatively affect your credit score.
Finally, don’t avoid your credit card entirely, either. Using it sparingly and paying it back quickly creates a good credit history for you. As you move forward and want loans or financing for other things (mortgages, vehicles, etc.) you’ll be more likely to get the interest rate that offered lenders with a good history. And that could mean lower interest rates, too.
Student debt can be with you for a long time, and high-interest credit card debt even longer. Keep credit card debt low to keep your finances in good shape.
If your post-graduate spending habit has become unmanageable, try Boomer and Echo’s 30 day no spending challenge to reset your financial priorities and beat the credit card debt.