When I was 18, my mom made me apply for a credit card. I was only allowed to use it for school books, gasoline and “emergencies.” Once a month, when I went home to do laundry, I would glance at my statement (never more than $60, except for the school book month8212;yikes!), and immediately pay off the entire balance. Although this was a more tedious process than simply swiping my card and never looking back, the idea was to build a solid credit history without ever paying a dime in interest rates. Six years later, though the statements often exceeded $60, my modus operandi remains the same: If I can’t afford to pay for something with my debit card, I won’t put it on plastic.
Before you pat me on the back (or tell me to pin a rose on my nose), allow me to make a confession. Credit card debt absolutely terrifies me. That, above the goal of a healthy credit history, is the reason I pay my bill in full every month. The idea of my hard-earned paycheck being ripped from my hands and mailed off to a black hole of 15 percent interest rates, instead of, say, fattening up my European travel fund, seems like the ultimate loss of personal freedom and flexibility8212;a self-inflicted form of slavery.
For example, if I bought a $1,000 flat screen TV and paid for it in minimum increments of $15 a month at a 13.8 percent interest (the national average according to www.bankrate.com), it would take me 10 and a half years to pay it off and cost me $909 in interest, for a grand total of $1,909. That’s 90 percent of the original value of the TV in interest alone! I can just hear the heavy metal chains on my ankles dragging with every step. Surely a logical person would run far, far away from that brilliant offer.
That’s why I was nothing short of stunned to read a 2004 study by Nellie Mae, a leader in student loans, reporting that the average undergraduate had an outstanding credit card balance of $2,169. Nearly 75 percent of undergraduates used credit cards for school supplies (paper, notebooks, etc.), textbooks and food. What’s more, the study revealed that 24 percent of students reported using credit cards for tuition. I repeat, that’s almost a quarter of students putting their tuition bill on their credit card, not on low-interest student loans.
For a Utah resident in a 12 credit hour undergraduate semester, that’s $2,445 for tuition and fees, before purchasing books, supplies, food and anything else to get through the semester. At an interest rate of 13.8 percent, I shudder to think about how that number multiplies if it takes several years for a student to pay more than the minimumrequirement every month.
“Insurmountable,” is how Bryce Robinson, a junior in environmental studies, described his debt. “Every paycheck I get, I think “Good, I can use this to pay down my credit card.’ But after rent, food and everything else, I’m lucky if I get a $100 toward it. And if I try to put down more, I end up needing to use my credit card to get by. I’m just spinning my wheels.”
Although the idea of saving up enough money to pay for college before actually attending classes is not appealing in our buy-now-pay-later society, the benefits far outweigh the quickly earned diploma. More than the incredible discount you’ll save when your semester costs aren’t compounded by four years of 15 percent interest, you will be saving yourself from the pressing weight of constant stress and worry. If you can’t afford to pay for your tuition, books and a semester’s worth of expenses, and you don’t qualify for a grant, low-interest student loan or scholarship, put the credit card down, back slowly off of campus and get a job. Even if it takes you twice as long to graduate, your first big paycheck from your first “real job” post-graduation will go straight into your savings account instead of a vacuum of high interest debt. Certainly then your diploma will be worth every penny.