Get Rid of Debt!

[muslgrl]

Get Rid of Debt!
By Samantha Edmondson, Southern Illinois University

Three thousand dollars in major credit card debt and all he got was a lousy T-shirt. During his sophomore year at Southern Illinois University in Carbondale, Neal Papich signed up for a major credit card in order to get a free T-shirt for a fund-raiser. Papich, now a senior in child psychology, has maxed out his $3,000 credit card limit.

"I try to cut down on what I use, but my one [card] has a zero percent interest rate for a year," Papich said.

Along with weekend party expenses, school loans and paying monthly bills, credit card debt is one of many financial problems students obtain during their time at college. According to MSN Money writer Liz Pulliam Weston, most credit-card carrying households, which hold more than $8,000 in credit-card debt, pay about $1,400 a year in interest at a 17 percent interest rate.

Jim Musumeci, an associate finance professor at SIUC, said students often make the minimum payments on their debt, unaware of the increased interest rate after certain amount of time. He compares it to other situations that occur on campus, such as students who park their cars in restricted lots.

"I ask them, 'Don't you know you will get a ticket?' They say, 'I will worry about it later,'" Musumeci said. "But eventually those tickets add up, preventing them from graduating or even being enrolled the next semester. The same happens with debt."

But there are ways that students can combat debt, purchase their own T-shirts and not have to sign up for another credit card in order to clothe themselves through four years of higher learning.

Weston, an eight-year veteran in writing about personal finance, offers three keys to defeating debt.

Get all the facts. Get intimate with your debt. Find out everything about your debts, including balances on every account, the interest rates, whether the interest is deductible and when and how those rates can change.
Prioritize your bills. Credit cards, car loans and personal loans, which are nondeductible, mortgages, home equity loans and some student loans, which are deductible, should be divided into piles, then ranked from highest rate to lowest.
Pay high interest debts first. Start with the highest rate, typically starting with nondeductible debt, then moving onto the next.
Mark Hoaglund, a SIUC senior in mathematics and computer science, said he keeps a fairly tight budget, refusing to carry any major credit cards and using his check card to pay for items only in an emergency.

Chris Labyk, assistant director of the SIUC Wellness Center, said that students should manage their time, create a balanced budget and not give into to all types of spending impulses.

"A lot of students eat out or go out with friends," she said. "Some people spend money when they get bored or are depressed, but it is a temporary feeling."

Papich, who is still not accustomed to balancing a budget, often spends $40 to $50 in one night out with his friends. But he said he is trying to watch what he spends more, since he knows it will catch up with him when he graduates with his master's degree in three years.

MSN's Weston states that although credit card distributors contribute to increasing debt loads by setting high rates, the consumer is the one who is ultimately responsible. Papich's parents have also reminded him of this.

"They said, 'you are going to have to clean up this mess,'" he said. "And it's true."

[feline]

Well, we have to think of the things that we're spending in terms of how we can pay them all, not just pay a partial amount when it is already due. To get rid of debt is simply to pay them when they are due. Moreover, it is best to purchase less items in credit and more in cash.

[poorgirl]

And if you do use credit pay it off at the end of the month to avoid finance charges.

[taiarain]

Poor, I'd take that a step further. In this world of online banking, there is absolutely no reason not to pay the charges off before they hit the statement. If you charge something, go home and pay for it right now.

Taia

[feline]

True, it is really hard to postpone payment of dues, especially if you are talking about paying bank cards. Banks are adept to charging very high interests. Last month, I forgot and failed to pay my due, couldn't even remember if they sent me statement or not. When I looked at my statement now, the interest is almost half of the total amount which I missed to pay.

[poorgirl]

I adds up quick. If you dont pay it at the end of the month you thne have interest and if you forget to pay and it is late that typically $30+ added on to your balance. Before you know it your balance is much higher than the purchase.

[Avian]

Banks can definitely nail you with charges. You have to constantly stay on top of your debt if you don't want to be suprised.

[ferby03]

Originally Posted by taiarain

Poor, I'd take that a step further. In this world of online banking, there is absolutely no reason not to pay the charges off before they hit the statement. If you charge something, go home and pay for it right now.

Taia

I agree with this. Especially if you have gotten a card for rewards points or something like that. As soon as you use it, get that check in the mail or go online and pay it off immediately. Then you won't forget about it and you won't get any interest charges.

[barbiedoll1973_tn]

Originally Posted by taiarain

Poor, I'd take that a step further. In this world of online banking, there is absolutely no reason not to pay the charges off before they hit the statement. If you charge something, go home and pay for it right now.

Taia

I am new to credit card I didn't know that you could pay it off the same day.

[poorgirl]

You can although some credit card companies have a limit on the number of payments you can make in a 24hour period, so check that out. I typically keep a total and then pay it off at the end of the month.