Excessive Credit Card Debt
For College Graduates

The Warning

Amassing excessive credit card debt while in college have long-term implications which are enormous and dangerous. The average obligation for a college graduate is $4100, a 41% increase from 2004! Remember, this is just plastic money, not including the extra pile of student loans that will be paid on for the next 10-20 years. Yes,that long. Too many people in their 40s and beyond are still trying to figure out how to eliminate their student loans.

Getting back to the credit cards, how long is it going to take to pay off that $4100? Right now, the average credit card interest rate is 16%. Using an online calculator, the minimum payment would be $95.12, include $5,000 in interest and take 21 years to pay off! That is an incredible implication. what if this same person could take that $4100 when he graduates and invest it at a simple 6% return? This amount over the same 21 years would grow to over $14,000!

Now think about that. Paying $9,000 or having $14,000. Wow, what a difference.

"But wait David, I will just get a job and pay if off quickly." This would be great if it actually happened. But what is usually the case is that coupled with student loans and the "necessities" of life, getting to pay off that credit card becomes less important when the minimum payment allows for much less cash flow being used. Then a mortgage is purchased and the excessive credit card debt is rolled into the mortgage to be forgotten.

Now think about that. Paying $125 each and every month for years and years. That takes a huge toll financially, emotionally, and spiritually. Just ask someone who is there now and listen to their admonitions. Having this excessive credit card debt hanging over the head forces people to take a job just for the money, ignoring where their passions and talents lie. Avoid a life of mediocrity. Live it out fulling your God given passions learn, earn, and serve.

We are warned in Proverbs that, "A prudent man foreseeth the evil, and hideth himself; but the simple pass on, and are punished."

Parents, teaching kids about money early on helps them to be good stewards of and live in God's economy, not man's. College students, do not succomb to the temptations of excess. Excessive credit card debt is any amount that cannot be paid at the end of the month.

Being Able to Focus on Saving Instead of Paying

Let's switch gears now and focus on saving and where that money should be going.

A recent graduate should be saving 15% of their income ... at least. First, establish an emergency fund of 6 months living expenses, "just in case". Put this in a savings account. Why? Many times, it takes that long to find a new job. With the average job lasting 2-3 years, there will be times when this emergency fund will be a financial, emotional, and spiritual life saver.

After paying off all their debt and establishing the emergency fund, attention can then be paid to retirement savings. If a 401K matching fund is available, take that. If not, put the same 15% into an IRA. Learn to invest and do it right. My friend Jay Peroni specializes in faith based investing, teaching people about moral investing as opposed to social investing. It is good to learn early to benefit more over a longer time.

Now, is this is not a much better scenario? To be saving and investing rather than worrying about excessive credit card debt? Start the debt snowball rolling now. Sacrifice your immediate lifestyle until it is paid off and an emergency reserve is created.

The likelihood of financial problems arising in the future is severely diminished; indeed it is eliminated, no matter what the income level becomes. And the ability of blessing others with your extra is beyond compare.

I provide much more help with credit cards to get you on the right track such as reducing credit card debt.

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