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I’m a Recent College Graduate Trying to Dig Myself Out of Credit Card Debt. – Megan

“Dear Steve,

I’m 22 and in 6,000 credit card debt!

I am a recent college graduate, and in some credit card debt. In college, I racked up 3 different credit cards (one with a $4,000 limit, one with a $500 limit and one with a $300 limit – who gives an 18 year old kid ) and all of them are maxed out.

I have my first “real” job making about $40,000, but with living in a very expensive city, incredibly high interest rates (28.99% on the $4,000 balance) from late payments back in college, on top of massive student loan debt that I am making timely payments on, that I can barely afford the minimum amounts due!

I pay around $350-400 per month on credit cards alone, and my credit score is suffering! I know I’m still young, but I don’t want to still be paying these in 5-6 years when I want to buy a house, car, etc…

Megan”

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The Answer

Dear Megan

Thanks for asking me for help.

The reason the credit cards gave you such easy credit is because they wanted to be first in line to load you up with debt so they had their grips on you.

Studies show that people have the greatest loyalty to the first cards they have so what better way to keep a customer for a long time than to be their first.

So the issue now is digging your way out.

The interest rate you are paying on the majority of your debt is excessive. It might be a penalty interest rate if you’ve missed some payments over the past couple of years or it just might be the “special rate” for new cardholders. I don’t know.

You have two quick ways to dig your way out.

If you have decent credit the first was would be to consolidate your debt through a LendingClub.com loan and pay a lower interest rate and lower monthly payment.

The second way would be to contact a credit counseling agency and put these cards into a debt management plan. In that plan your interest rates will be cut, maybe even significantly, but your monthly payment will remain the same. Additionally, the cards you include in the debt management program will be closed and that can impact your credit because you will not have the advantage of maintaining a long credit history on those cards.

On top of just digging yourself out of debt I also need you to get in a position where you can also begin to save money automatically each month and build up a savings account or emergency fund to pay for surprise expenses instead of putting those on plastic.

If you need room in your monthly budget I’d try the LendingClub.com debt consolidation loan first. If you can afford the monthly payments on your credit cards and save some each month then the credit counseling approach might be better for you.

Well there is no sense wasting a perfectly good mistake I always say. This episode can teach you a lot about what to avoid moving forward in your life and if you remember the lessons learned you will be a wise money steward.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

Im a Recent College Graduate Trying to Dig Myself Out of Credit Card Debt.   Megan
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I'm a Recent College Graduate Trying to Dig Myself Out of Credit Card Debt. - Megan by

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Steve Rhode

    Don’t forget about ReadyForZero.com, another site that offers free guidance and plans on digging out of debt.

  • Jamesvalencia1

    Hi Megan

    I definitely know the feeling of having put all this money in to college for a career and having these credit card companies on your back because of their loose credit standards.

    Some things I would add to the answers already posted are to:

    - Reach out to family. If you are comfortable with dealing with money between family, they could be one of the most viable alternatives for paying off your credit cards. You can write up a promissory note to your relative to make it a sincere promise to pay them back (hopefully at 0% interest). You do have a job now, so it does add to your credibility.

    - You can try converting those credit cards in to personal loans. Other than lendingclub.com, there are plenty of credit unions or banks that would love talking to a person who has a job to consolidate debt. A short job history may be a hindrance, but it is worth the shot if you are not comfortable with online lending sites. There are many options to lowering your APR. A high APR is truly like running a race with heavy weights on. So you would be smart to do something about it.

    - Analyze your spending habits. You did not get to the point of maxing out your credit cards without spending your way there. I know of people who file for bankruptcy, but end up piled up with credit card debt again. So if you haven’t learned your lesson from what got you so much debt, I would suggest taking a hard look at your spending. Try mint.com. Its a free online money management service.

    Wish ya the best!

  • Jamesvalencia1

    Hi Megan

    I definitely know the feeling of having put all this money in to college for a career and having these credit card companies on your back because of their loose credit standards.

    Some things I would add to the answers already posted are to:

    - Reach out to family. If you are comfortable with dealing with money between family, they could be one of the most viable alternatives for paying off your credit cards. You can write up a promissory note to your relative to make it a sincere promise to pay them back (hopefully at 0% interest). You do have a job now, so it does add to your credibility.

    - You can try converting those credit cards in to personal loans. Other than lendingclub.com, there are plenty of credit unions or banks that would love talking to a person who has a job to consolidate debt. A short job history may be a hindrance, but it is worth the shot if you are not comfortable with online lending sites. There are many options to lowering your APR. A high APR is truly like running a race with heavy weights on. So you would be smart to do something about it.

    - Analyze your spending habits. You did not get to the point of maxing out your credit cards without spending your way there. I know of people who file for bankruptcy, but end up piled up with credit card debt again. So if you haven’t learned your lesson from what got you so much debt, I would suggest taking a hard look at your spending. Try mint.com. Its a free online money management service.

    Wish ya the best!

    • http://GetOutOfDebt.org Steve Rhode

      Don’t forget about ReadyForZero.com, another site that offers free guidance and plans on digging out of debt.

  • Settle First

    Megan, college campuses are a banks “hunting ground” as some may say, and for no other reason than being first in line for times like these. They extended you credit, you needed it so you took it, and now you have, as you said, your first real job. This situation is playing out exactly as they planned. Remember, somebody once said “plan for the future” and now, suddenly, you have found that you’re there- right in the middle of the day that seemed so far away.

    Your first tool is you. Then your options. go through your budget. It really DOES help. see where you are spending money. Car insurance? Maybe you can cut that down by 30 bucks each month. That is enough to knock out your small card in a few months. Save another 50 bucks here and $40 bucks there, you may be able to hammer this out in the next 24 months on your own.

    It takes discipline, and trust me, I have been there. Honestly. But there is no better option than doing it yourself. I am not familiar with lendingclub.com, but Steve recommends them, so they must be a viable option. If you can, get a consolidation loan from them, which would likely be less than what you are paying now.

    A debt management plan will have an impact on your credit, but credit is second to the ability to eat in my opinion. If they can help reduce your payments (unlikely) then maybe that will work too. But typically, as Steve said, your payment would (likely) stay the same, with lower rates.

    Either way, go though your budget and apply as much as you can extra each month. Hopefully after going through your income and expenses you will find that you have a manageable situation.

    Best of luck to you and trust me when i say, you are certainly not alone as a fresh college graduate with cc debt. It’s more common than hazing at frat parties.

    Best of luck.

  • http://twitter.com/SettleFirst Settle First

    Megan, college campuses are a banks “hunting ground” as some may say, and for no other reason than being first in line for times like these. They extended you credit, you needed it so you took it, and now you have, as you said, your first real job. This situation is playing out exactly as they planned. Remember, somebody once said “plan for the future” and now, suddenly, you have found that you’re there- right in the middle of the day that seemed so far away.

    Your first tool is you. Then your options. go through your budget. It really DOES help. see where you are spending money. Car insurance? Maybe you can cut that down by 30 bucks each month. That is enough to knock out your small card in a few months. Save another 50 bucks here and $40 bucks there, you may be able to hammer this out in the next 24 months on your own.

    It takes discipline, and trust me, I have been there. Honestly. But there is no better option than doing it yourself. I am not familiar with lendingclub.com, but Steve recommends them, so they must be a viable option. If you can, get a consolidation loan from them, which would likely be less than what you are paying now.

    A debt management plan will have an impact on your credit, but credit is second to the ability to eat in my opinion. If they can help reduce your payments (unlikely) then maybe that will work too. But typically, as Steve said, your payment would (likely) stay the same, with lower rates.

    Either way, go though your budget and apply as much as you can extra each month. Hopefully after going through your income and expenses you will find that you have a manageable situation.

    Best of luck to you and trust me when i say, you are certainly not alone as a fresh college graduate with cc debt. It’s more common than hazing at frat parties.

    Best of luck.

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