Personal Finance for College Students

Unit 4: Avoid Debt

Avoiding Credit Card Debt

Did you know that the average graduating college student has $4,138 in credit card debt?

If you make only the monthly minimum payment required on your credit card, it will take you years and thousands of dollars in finance charges to pay off your card.

  • Scenario 1.  If you paid the monthly minimum payment of $60 dollars with an interest rate of 18%, it will take you about 451 months (37 years) to pay off a $3,000 balance.  In addition, you will have paid about $7,930 in interest charges. 
  • Scenario 2.  If you paid a fixed payment of $100 (or $40 more than the minimum monthly payment) with the same 18% interest rate, it will take you about 41 months (about 3.5 years) to pay off the $3,000 balance.  And you will only pay $1,015 in interest charges. 

Scenario 2 is the best solution. By adding an extra $40 and fixing your monthly payments each month you can save money and pay off the card.  But when possible, pay off your account in full each month.  

Download PDF: What Does Your Statement Tell You - Part 1

Download PDF: What Does Your Statement Tell You - Part 2

Credit Scoring and Reporting

How you use credit in college, will determine your ability to pursue further credit after school, take care to maintain your credit score and avoid excessive credit card debts.  A credit score is a measure of your financial history and reveals whether or not you have been responsible with past payments.  

Factors that determine your credit score:

  • Payment History—Measures your ability to pay your accounts on time.  Making even one late payment will lower your score.  It is the largest factor in your score.
  • Outstanding Debts—Avoid carrying high credit card balances.  Balances that exceed 35% will lower your score.    
  • Length of Credit History - The longer you have maintained a good credit history the better—don’t open and close accounts. 
  • Inquiries - Opening too many different accounts in a short amount of time shows lenders you are not financially stable.
  • Types of Credit – Having different types of credit, such as a credit cards and an auto loan, will strengthen your credit score.   

Review Your Credit Report. Your credit history will follow for years, so if you have had problems with outstanding debts or credit cards review your credit report— negative information might mean you’ll have a tough time getting a loan, renting an apartment or even getting a job! Obtain a free credit report from each main credit reporting agencies by visiting or call the credit bureaus to order a report:

Experian: (888) 397-3742
TransUnion: (800) 888-4213
Equifax: (800) 685-1111

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