Credit cards revisited


We have covered this topic before, but with the increasing costs of attending school and living in some of the major cities where schools are located, it is a topic worth revisiting. Credit card debt is some of the most easily accessible debt to students, but also the most harmful. Many students, already living off of debt in the form of school loans, do not think twice about charging necessary living expenses and other “standard of living” expenses to their credit cards. While it is OK to spend the occasional dollar on recreational activities that one has become accustomed to in life, a vast number of students who end up in credit card debt grow comfortable with charging much more. If you don’t yet have a credit card, look at some unsecured credit cards for poor credit and choose the best one for your needs and spending habits. There are many different types of credit cards available so make sure you choose wisely.

There are not many things that I would suggest committing extra funds to before saving for retirement, but credit card debt is one of them. It is crucial to your financial well-being over the next 30 plus years that once you start working, you work to get your credit card debt under control. One way to do this is to see if you are able to consolidate your balances to one of your lower interest bearing cards. Credit card companies make their money off of you FAILING to pay your credit card balances, so there are options to consolidate often available. If you are not able to consolidate, but have several cards with balances, ensure first that you are making minimum payments on all of them. If you fail to do this, your credit score will suffer significantly and you may have an extremely difficult time if you want to access loans to buy a home, car or any other major asset.

Next, stop using the card with the highest interest rate that carries a balance. If you are planning to buy any asset that would require debt to purchase in the next year, keep the credit card open even if you do not plan to use it. This will protect your credit score from dropping initially after closing a card. Once you have paid off the minimum balances each month, put the most funds possible toward paying off the card with the highest interest rate. Interest rates SOAR on credit cards after initial low rates expire, so it is important to dig out of the deepest hole first.

If you would like more resources regarding credit card options and payoff schedules, check out 360 Financial Literacy or the NFCC.

Do you have a question about personal finance? Ask it in the comments below and it could be the topic of a future Money Monday post!

~Megan Mathers, JD, Pesavento & Pesavento

Megan Mathers

Megan is an accountant and tax attorney with Mathers Law, a firm focused on providing accounting, tax, business advisory and legal services to the dental and medical communities. Megan earned her Bachelor's Degree in Accounting from Marquette University and her law degree from Loyola University Chicago School of Law. Megan's practice focuses on tax compliance, tax planning and wealth and estate planning.

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