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…


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.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

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.

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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.

Damon Day - Pro Debt Coach

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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.
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