I paid for my whole semester (I am out of state) with a credit card. It cost 12,000$. I’m planning to pay it off in the next 4-5 months. Will my debt get too high anyway?
I’ve already paid a bit over 3,000 since September, and I’m aiming for around 2000 each month. Am I in big trouble? I see people talking about their debt still rising even when they pay, and it’s making me anxious.
Thanks!
If you don’t pay off the entire balance, you’ll rack up interest each month on what you owe, which could be around 30% a year if it’s not a good card. It’s better to avoid this situation compared to taking out a loan. Try to pay it off as soon as you can or consider getting a subsidized school loan to cover the credit card debt since it won’t gain interest while you’re still in school.
@Wynne
Just to clarify, that 30% is annual and compounds daily, not per statement. It’s doable if you can pay above the minimum, even if it’s not the best scenario.
Zander said:
@Wynne
Just to clarify, that 30% is annual and compounds daily, not per statement. It’s doable if you can pay above the minimum, even if it’s not the best scenario.
Exactly, thanks for adding that detail. It seemed obvious, but not everyone knows.
@Wynne
Thanks!
@Wynne
No problem! It sounds like you’re just starting out in college, and I’m guessing you’re in the U.S. We don’t really teach this stuff in school, so I thought some extra clarification could help.
Zander said:
@Wynne
No problem! It sounds like you’re just starting out in college, and I’m guessing you’re in the U.S. We don’t really teach this stuff in school, so I thought some extra clarification could help.
Yes, I’m in the U.S. My parents are immigrants and never had credit cards because they were scared of debt. They can’t teach me about this stuff, and my friends don’t know much either. I feel lost. I’m trying to research, but everything is so complicated. I feel really clueless.
I’ve had my credit card for 3 years and always paid on time (only small expenses until now). My limit is 12,000$. My parents used to cover my school fees, but due to family issues, they couldn’t afford this semester. I had no choice but to use the card.
Thank you for your advice.
Zander said:
@Wynne
Just to clarify, that 30% is annual and compounds daily, not per statement. It’s doable if you can pay above the minimum, even if it’s not the best scenario.
So, if I pay around 2000$ or 3000$ each month, would I be done in 4-5 months, or will I still owe money? I really need to learn about credit cards.
@Cameron
Taking a financial literacy course would be a great idea. There are good online courses out there. If you can handle basic math, it’s not too hard, but some things like compounding interest can be tricky if you’ve never dealt with them before.
With your $12k balance, expect around $250 in interest monthly, which will go down as you pay off the principal. So if you can manage $2k a month, you’ll pay it off in about 7 months.
If you pay $500 a week instead, you’ll reduce that interest a bit and end up paying less overall while budgeting the same amount each month.
I hope this helps. Credit card debt can be scary, but it’s not the end of the world once you get the hang of it.
@Zander
Thanks for explaining everything!
Zander said:
@Wynne
Just to clarify, that 30% is annual and compounds daily, not per statement. It’s doable if you can pay above the minimum, even if it’s not the best scenario.
I’m working two jobs while in school, so I think I can pay off good amounts soon. But I’m really scared of debt and feel unprepared to handle this.
@Wynne
Thanks! 
Cameron said:
@Wynne
Thanks!
You’re not doomed, especially if you aim to pay it off in 5 months. You should only owe about $500-1000 in interest unless your rate is really high.
Cameron said:
@Wynne
Thanks!
You’re not doomed, especially if you aim to pay it off in 5 months. You should only owe about $500-1000 in interest unless your rate is really high.
Thanks! I think my rate is 29%.
I can’t give you a specific number without knowing your interest rate. But if your rate is 29% and you owe 12,000, you’ll be adding about 289.34 in interest each month.
The good thing is you’ve already paid down a chunk of it, so your monthly interest will be less than that.
@Paris
That sounds about right. One more tip: if your card lets you make multiple payments each statement, do that. It helps lower the amount that accrues since most cards compound daily.
Zander said:
@Paris
That sounds about right. One more tip: if your card lets you make multiple payments each statement, do that. It helps lower the amount that accrues since most cards compound daily.
I had no clue! Thanks a lot. My credit card does let me make multiple payments, so I’ll start doing that.
@Paris
Thank you! My interest rate is exactly 29%. Could you send me the link to that calculator? I feel like I need to learn more about finances since I work hard to save, but I’m worried I’ll mess up if I don’t take this seriously.