Ask The Consumerists: Getting Out of Credit Card Debt

Ah, to be in college again, free of care, living life to the hilt, and mired in thousands of dollars of credit card debt .

In his third year at college, L.S. writes he has managed to get himself into owing a spot or two. He’s got $1300 on his Chase card at 23.74% APR and $850 on his Citicard at 17.74%. He makes $400 a month at his part time job.

CapitolOne’s Smartswitch debt consolidation program is looking attractive, says L.S.

Consumerist readers, older and wiser or young and precociously fiscally responsible, what should L.S. do?

Bonus Link: The credit card debt visualizer generates a pretty colored picture of your debt and how long it will take to pay.

UPDATE: L.S’s minimum payment for Chase is $42 and $22.50 for Citi. He pays around $100/month in groceries and lives on campus, so there’s no rent.

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  1. AcidReign says:

    …..In 1982, they generally wouldn’t let college kids have a credit card unless the parents co-signed. We did have ATM cards, where one could get $100 a day, if you could find an ATM for your particular brand of bank! (And your account wasn’t overdrawn. No, scratch that. In 1982, the ATM didn’t know your account was overdrawn. It all came home to roost later, though, if you bounced an ATM withdrawal!)

    …..I’d be leery of “CapitolOne.” All the “Capital One” Platinum visa offers I get mailed every week don’t have that spelling. “Capitol” is a building, I think. “Capital” is the money, baby! He’ll probably pay a big fee up front, and get nothing. Unless that was a typo in the post above…

    …..I’m betting he can’t get a significantly better than credit card interest rate without collateral. My solution would for him be to sit out a semester or two if he can get a decent job and pay it off. Of course, that means not blowing the new, bigger paycheck!

  2. Harlan says:

    Ack, 20% interest! With only two grand in debt, L.S. should talk to mom and dad, and sign a legally enforceable contract with them to consolidate the loan at, say, 5% annual interest. Mom and dad pay off the credit cards (cut up into sharp little pieces, of course), and L.S. makes payments of $50/month, accruing interest, until principal and interest is paid off. Penalties for late payments should be lumps of coal for birthday and Christmas presents.

  3. nweaver says:

    Live on rice and beans. Seriously.

    You can live really cheaply on Rice & Beans. Buy a 30 lb sack of each, buy a bunch of random spices, a big jar of multivitamins, and some variety of assorted spices.

    Put every extra cent to payoff the debt.

    Consider cancelling long distance on your phone. Mom and dad can call you. Cancel your cell phone.

    And Rice and Beans….

  4. NoUseForAName says:

    Are they still paying cash for plasma these days?

    Seriously, try getting a student loan in the amount owed and pay off the debt and then knock out the loan as soon as possible. Normally I wouldn’t recommend this but in this case it’s good because it’s not a ton of money but will reflect good on the credit history on paying the credit cards and the loan back assuming L.S. understands to pay everything on time. The most important thing is to learn the lesson early when it can be less painful. Learn to pay cash for everything now and you will save a ton of headaches later.

  5. matto says:

    Card companies used to love sending me new card offers with various 0% (for some period of time) APR balance transfer dealies.

    I’ve had a modicum of success shuffling a bit of debt around across these; maybe the idiot kid can try it, assuming he’s got the attention span.

    Kids, these days. Sheesh.

  6. WMeredith says:

    +1 on Harlan’s plan. It worked for me, only it was seven grand, and my dad was, like, a total dick to me for the first few weeks… o.0

    It took two years, but now the only debt I have is my car, and $1500 left on my student loans. As soon as I clear that, I’m buying a house.

  7. non-meat-stick says:

    I am a recent college graduate with app. 3-4 times LS’s debt. My advice is to not be like me! I have no collatoral, no home, and a loan on my car. I have a good paying full time job, I cannot get a loan to consolidate my credit card debt. I have not used credit cards in 2 years. I too will have to ask my parrents to cosine for a loan.

    Educate the young. there needs to be a class or some kind of education for high school seniors about the dangers of credit and maintaining a good report…

  8. mark duffy says:

    wait a few years. get the balances cranked up to about 25 grand. get married. get divorced 2 years later. pay off your ex’s debts out of guilt to add another 10 grand, THEN start paying them off gradually. 10 years later, you’ll have yourself a credit report worthy of being framed by the treasury dept.

    that’s how I handled your situation.

  9. mrscolex says:

    dumb question:

    What to do if your parents can’t/won’t cosign on a loan? Doesn’t that mean you’re particularly screwed? Seriously the rice and beans trick works but it’s not particularly effective for things like emergency money.

  10. Smoking Pope says:

    This amount is relatively low (I know, it doesn’t seem that way when you’re a poor student (been there), but it is.) Work extra hours wherever you can; when you sell your text books back, use that money to pay down the debt; basically scrimp and save to get it done. $2,000 in one year is doable.

    The most important thing is to not let it continue to trash your credit (if it has at all, no word on whether he’s been making payments). Discipline is the key. Discipline, discipline, discipline. I know that from having had none myself. (Although I know of worse cases, like my ex-wife. She jacked up $26K in credit card debt while making $18K a year at her job. Ouch.)

  11. matto says:

    Am I betraying my age by suggesting you get a job?

  12. Ben Popken says:

    Matto, as the post states, he has a part-time job.

  13. Smoking Pope says:

    Ben, you should solicit credit card debt nightmare stories. I bet there’s some classics out there.

  14. nweaver says:

    Assuming $8/hr after tax, that $400/month income means he would be working 50 hours a MONTH.

  15. Brian D says:

    First things first. Stop using the credit cards! Cut them up, anything it takes to stop. I started out with the same situation but eventually ran up nearly $15k in debt and was really depressed. I finally got a personal loan from my credit union, because I wasn’t getting the debt down at all with those high interest rates. Paid off the credit cards with the loan money, never used them again, and 2 years later was free and clear.
    It may not be likely you can get a loan on your own, but it’s only $2200, which if they allow you to spread it out over two years shouldn’t be much more than $100/month with the interest. It’s worth a try, at least talk to someone at a bank or CU, and see if they will give you something, or if they will if your parents co-sign.
    Most importantly, get rid of those credit cards! Those rates are ridiculous!

  16. mojohealy says:

    A good site provided by the New Zealand Retirement Comission is http://www.sorted.org.nz/
    Though some of this stuff is NZ-specific, a lot of the advice is universal and the calculators are especially useful.

  17. limiter says:

    $2150? That is it? When I was in college no one ever said no. When you combine that with my moronic money management (basically spend money as fast as possible, worry about it later) I left college with 18 times that in CC debt. Plus car loan.

    I will be paying on CCs for a while, but my splendtastic plan consists of putting an extra $500 on whatever the most ass-raping interest rate card I have is. Once that was paid off I took the amount I was paying on the next highest interest rate card added it to the original $500. So $600 on the next card. Just keep adding the payments you were already making and you get the picture. So by the 4th card/loan you are paying around $900+ per month (in my case) and suddenly things don’t look so bad, even if you sold your soul to Citibank (as I did).

    The rice and beans tip doesn’t work for people like me. I tried that. Problem is you grow to hate it, and if you have the crazy debt I do you don’t have a lot of self control in the first place, you end up splurging on restaurant food to make eating not so horrible.

    Make a budget and put splurge crap in the budget. So if you go out to eat a lot then put money in for some of it. If you go to the movies, put money in for it, otherwise your life will be boring and you’ll entertain yourself with, well, spending money.

    Final tip: Cancel cards. I know everyone says “don’t cancel cards it hurts your credit”. Fuck your credit for now, it will get better, and canceling card doesn’t hurt it so bad you won’t ever be able to buy that Yacht you’ve been dreaming about. When I spend it’s an impulse buy so the cards I’ve canceled before I started the building-pay-off plan I described above, consistently went down in balance. Call 1-888-5-OPTOUT and stop credit card offers. No, you don’t need an “emergency” credit card. If you do keep a card and they raise your limit, call them and tell them to put it back down, they will. If they don’t cancel it.

    This has worked for me so far, maybe it will help someone else.

  18. Mary Marsala With Fries says:

    I’ve been in worse debt, mostly due to emergency stuff, and bad luck. I’ve gotten out of it twice for me, and once for someone else. Here, have a soapbox. ;)

    First, DO NOT USE THE CARDS. You’re in debt, wich means you have *less than zero* “wiggle room”. No, you can’t afford that new CD, not until you pay off your debt. Do not let the commercials convince you that it’s okay to keep spending even if you’re in debt–it’s NOT. Cut them up or stick them in the bottom of a drawer you never go into. UNDER NO CIRCUMSTANCES HAVE THEM IN YOUR WALLET. Make a list of all the things you’d love to be able to buy, but can’t until you pay off the cards, and I bet you find a little extra money every month to toss at the cards. Everything you pay extra on principal takes time off of how long it’ll take to pay that crap off. *Always* pay extra, preferably double your minimum payment, otherwise it’ll take for*ever*.

    Second, pick the one with the least interest rate, call them up and ask if they’ll extend your balance. Usually they will, especially if you sigh and say “Darn, that means I’ll have to switch companies then…”. Then transfer the balance OFF that 20% monster and onto the cheaper one. Watch your mail for offers with 0% balance transfers, and get one as soon as you can. The 0% “introductory rate” usually lasts 6 months or a year; try to have another offer to switch to by then. There’s nothing wrong with shuffling that balance around as much as you have to to keep the lowest possible interest rate. With a little work–very little–you can get that whole debt on 0% cards very quickly, which will save you a bundle, provided you ALWAYS, ALWAYS PAY ON TIME. (That’s Caps Lock Rule #3.) Once you start being late or missing payments, your rates keep going up, and you’re just paying more and more money that the CC companies get to pocket. Screw them. NEVER be late. And remember to PAY AT LEAST DOUBLE THE MINIMUM. Paying the minimum balance doesn’t do jack except keep them off your back, so consider it an Emergency Only thing to pay the minimum.

    Set the highest payment you can tolerate, write it on a piece of paper and stick it on your dorm door, where you have to look at it every day and think about how much fun stuff you could have bought this month if you didn’t have to pay that. Then remind yourself that the faster you pay it off, the less you’ll pay overall, and next time you’ll be smarter and not get into debt unless it’s really worth it.

    Holy crap, that got long. Sorry! –M.

  19. Clare says:

    I know the overwhelming consensus on Consumerist is that “debit/check cards = bad,” but I haven’t had a single credit card for the last two years. I paid off the one card I had after maxing it out ($500–yeah, you read that right) and canceled it. I swipe my debit card like credit everywhere I go and it’s been the best solution for me. I check my balance every day on the web or over the phone. I use it so often I’ve memorized the numbers.

    It’s actually quite handy having only one card: I never have to pull the card out when I buy stuff online or over the phone, I always know what credit card number is stored on Amazon/J.Crew/Ticketmaster/whatever, and I get a listing of EVERY SINGLE THING I’ve bought for the month when I get my bank statement. Plus, there’s the added benefit that you don’t spend money you don’t have.

    Works for me, anyway.

  20. thrillhouse says:

    looks like we have a few Dave Ramsey fans here already but to add:

    1> $2150 is nothing. Work your butt off and pay what you owe. The interest rates should not be an issue, but if you like, surf them to a low interest card till you pay it off.

    2> change your habits, stop using these rip-off credit cards. Why do you think every retailer on earth now offers their own card?? They are HIGHLY profitable. Build up a $500-1000 emergency fund and shred the stupid credit cards

    3> I’m not sure what this BS is about debit cards being bad, but they have the same protection against fraud as credit cards, and require no stupid debt. They simply require RESPONSIBILITY. Look into it.

  21. OkiMike says:

    In my college days, I had about $2000 in CC debt and had to rip them up and join a non-profit debt consolidation program.

    After college, with about $40,000 in loans to payback, my advice would be to keep the cards, but pay back everything as fast as possible, even if it means subsisting on gruel for 2 or 3 years.