What You Should Know About Your Credit Card Balances
Carrying balances on a number of student credit cards simultaneously can create an illusion of a manageable situation. However, by taking a step back and looking at the big picture you will soon realize that the total amount owed to the banks will be much greater than each individual account balance. Adding up all the balances as one total can be a disturbing moment in time for many of us. Does it this seem familiar to you? If so, let us talk about what a person should do if he or she happens to be trapped by a multiple student credit card debt.
Which student credit card should you pay off first? Most people will have the tendency to pay off the student credit card with the lowest balance first. This will gives you a feeling of accomplishment. Although it really is a good feeling to empty one of your debt buckets, the main goal for you carrying such a burden, first of all, should be to save money and not just mark accounts closed. Not having adequate money sources to satisfy your spending habits have initially brought you to this unpleasant circumstance. That is why you should fight the cause to solve the problem, which can be interpreted as – you need to stop wasting money.
You will save fare more money by paying off the student credit card with the highest annual interest rate first. If there is an option of transferring (preferably for free) the balance from credit cards with higher APR to the credit card with the lowest APR, this is how you should make such transfers and then proceed with paying off the remaining balance of the expensive accounts. Of course, make sure you do not forget making at least the minimum payments to all the other student credit card accounts.
When should you transfer your balances? If the amount you owe is great and you will not be able to pay it off within a year or sooner, this is when it many help to transfer the balance to another student credit card with a lower or 0% APR student credit card. For such a transfer to be profitable you should compare savings and the cost associated with any transfers. As a rule, the transfer fee will generally be around 3% of the amount transferred. If you save about twice as much as it costs to make a transfer (or at least 6% a year), you may consider doing so to save more money.
Now, I do not want you to think I am against a student credit card. They are great tools for college students just getting out on there own. They will help you establish credit for the future. The key is to treat your finances with knowledge and a great deal of responsibility. Sometimes these new fangled toys can get out of hand. That is ok though. If you know how to make the situation better, you have learned something that will go a long way for you.
Student credit cards.com @ July 13, 2008