Credit Card Debt Management

With an unstable job market and increasing college costs, it’s a hard time to be a college student. It’s no wonder credit card companies’ aggressive on-campus marketing campaigns appear so enticing to students. A U.S. PIRG survey of 1,500 students at 40 colleges in 14 states revealed the following:

-2/3 of college students have at least one credit card.

-55% use their credit card for daily expenses.

-Average balance for students with no parental help = $1,301

-Average balance for senior students = $2,623

Granted, student credit card debt is nothing compared to student loan debt. However, the credit card debt certainly won’t help pay off the student loan debt or establish financial stability after college. Furthermore, experts say accepting credit that is essentially unaffordable in the college years marks the beginning of a highly damaging pattern of behavior that contributed to the recent housing crisis.

Silicon Valley’s Mercury News cited 19-year-old Holly Jackson as saying she feels overwhelmed by her credit card bills and may need to pick up a second job.

“I’m learning my lesson,” she said. “After I pay these off, I don’t plan on getting more. They’re awful.”

Undeniably, credit card companies themselves are not without fault. Their aggressive and misleading on-campus marketing campaigns have been legendary. Sen. Robert Menendez (D-NJ) recently proposed a bill that would require consumers under age 21 to “opt in” before they could be the target of credit card solicitations. Additionally, universities are stepping in to provide personal finance education. These are certainly steps in the right direction.

It’s a known fact that expense accounts can spiral out of control. This is as much true for government employees as for corporate employees, judging by recent news that federal workers were caught charging lingerie, online dating services, iPods and other superfluous items to government credit cards. In the current economy, few organizations can really afford extravagant spending in the name of client relations, let alone any stray personal items that may fall outside the bounds of company-approved purchases.

MasterCard has an answer. The inControl credit card will enable supervisors to set a spending limit and the time parameters within which spending can occur, list which hotels and restaurants fall under the umbrella of acceptable spending, and even receive real-time updates by e-mail or text message regarding what purchases are made with a particular card. It really is a remarkable service.

“It will help reduce maverick spending, improve compliance with corporate policies, and simplify accounting,” Steve Abrams, MasterCard’s global head of commercial payments, told BusinessWeek earlier this month.

Undoubtedly, the launch of this new product — offered in conjunction with Orbiscom technology and the Royal Bank of Scotland — will forever change the way business is done. Maybe Uncle Sam should sit up and take notice.

Credit card payments can strap your budget and have you financially imprisoned in no time. The more you use them, the higher your payments increase, which means most people have to use the cards more when their money runs short. The 18- to 34-year-old demographic is the hardest-hit right now. With social pressures for this most coveted advertising demographic to buy everything under the sun, the group is becoming known as “Generation Broke,” as the Intelligent Ignorance blog humorously points out. Set aside all psychological analyses as to why they feel the need to dig themselves deeper into debt to maintain a certain lifestyle, let’s look at the ABC’s of digging Generation X and Y out of debt.

It boils down to savings — you know, that little account that bails you out of emergency situations when you don’t want to rely on your credit cards? The other thing is to define an emergency situation that requires you to dip into your savings account (it’s not when the Jimmy Choos are on sale). The following four tips can help you stretch your dollars, so money can go into your all-important savings account and ultimately, toward paying off your credit card balances.

Find an inexpensive hobby. You can certainly find other uses for your time than shopping, dining out, visiting the movie theater, etc. What about things that cost little or no money, like exercising, blogging, reading, making art or music, volunteering, or going on a picnic? All you’re out is the gas money to get there, which come to think of it, could be quite a lot. You could go really thrifty and invite friends over to your house for a game night or bonfire and let them spend their gas money instead.

Rediscover your kitchen. Far too many people spend far too much money on dining out. It is so much less expensive to cook — and you have leftovers for lunch or dinner the following day! I once calculated that my family was spending a shocking $600 per month on restaurants. If you must eat out, try the dollar menu. There’s some good stuff on that list!

Plan in advance for gift-giving. You may see a wedding, new baby, birthday, or holiday in your near future. Start setting money aside now for those seasons. You can even go ahead and buy the gifts while you’re out and about, when you see nice things on sale. That way, you’re not scrambling at the last minute and overpaying for convenience. This is particularly true during Christmas, the season when most people tend to overspend dramatically.

Buy clothes secondhand. We’ve all known the person who must keep their closet filled with only the latest fashions. They toss out old clothes that are “so last summer.” Maybe your track record shows that you in fact are one of these people. Word to the wise: Stop being one of those people and start benefiting from their generosity. That’s right, these are the people who are filling secondhand stores like Plato’s Closet and Goodwill with beautiful, fashionable, name-brand clothing at low, low prices. How generous! Another shopping strategy is to pick well-made, durable, but versatile pieces that work well with a variety of other clothing items, so you’re splurging only on a few special items instead of on everything. Happy saving!