College Student Credit Card
If you ignore paying credit card, the bad news will not go away
By Steve Bucci, bankrate.com
July 23, 2006
Dear Debt Adviser: I am currently a college student working toward my master's degree. Last summer, I was offered a credit card with a somewhat large limit ($2,500). Well, unfortunately, I managed to max it out by the end of the summer because I had a job at the time and thought I could pay it off.
When school started, my income became very limited. I only had money to pay for rent and food, nothing else. As a result, I let the credit card go and have never really answered the creditors' phone calls. A couple days ago, a new phone number started calling me and I think they sold my debt to a collector. I do not know what to do. Right now, I could only afford to pay $50 a month at the most. I am so confused and feel so helpless. Please help me.
Ventura County Star
P.S. I will never do this again. I definitely learned my lesson. Thank you. — Jess
Dear Jess: When I first began giving credit and debt advice, I coined a phrase. At the risk of having my wife roll her eyes, let me pass it on to you: "Debts, unlike wine, do not improve with age." Your letter is an excellent example of this premise. In fact, usually the problem just gets worse. In your case, the amount that you owe continues to grow each month with interest charges and fees due to the fact that you are not making a payment.
One common misconception is that once you stop making payments on your credit card debt, and it is written off or is turned over to a collection agency, any applicable interest charges and fees on the account stop. That is incorrect. The terms for the account remain in effect when the debt is sold to another company.
So the balance on the account is accruing interest each month and most likely a late payment and over-the-limit fee each month. By ignoring the debt, you now owe more than the original $2,500 balance, probably a lot more.
For all practical purposes, this debt will not go away. Some people might tell you there is a statute of limitations on debts, and there is. However, if you are planning on living a normal life between now and the expiration date of the debt, which may be years away, then you have to deal with it. That means dealing with the collector. As difficult and painful as it might be to deal with your collector now, it will be better and cheaper than waiting for a court summons and dealing with it then.
Here's my advice: First, figure out how much you can afford to pay back each month. Don't just use your current income and expenses. Try to free up money by cutting back and add to income with a part-time job or some other work. Consider selling some stuff to get a decent good-faith down payment in hand. Next, call the collector and agree on a repayment plan. Be careful not to over-promise just to get off the phone. Get your arrangement in writing to be sure that you both understand it.
Keep in mind that collectors have to follow rules. One rule is that they cannot use abusive language on the phone. If you are unable to reach a workable solution with the collector, I would suggest that you call the original credit card issuer and try to work with it directly. If this fails, contact a reputable credit counseling agency and let it help you resolve the situation.
Tackling the problem instead of ignoring it will alleviate your feelings of helplessness and you will feel much better about the situation.
Good luck!
P.S. I'm glad you have learned your lesson. As financial problems go, this is not a big matter. How you handle it is.
— The Debt Adviser, Steve Bucci, is president of Money Management International Financial Education Foundation and the author of "Credit Repair Kit for Dummies." Visit http://www.moneymanagement.org or call 1-877-311-2227 for debt advice.
2006 © The E.W. Scripps Co.
College Student Credit Card Advice
posted by News at 4:01 AM
By Steve Bucci, bankrate.com
July 23, 2006
Dear Debt Adviser: I am currently a college student working toward my master's degree. Last summer, I was offered a credit card with a somewhat large limit ($2,500). Well, unfortunately, I managed to max it out by the end of the summer because I had a job at the time and thought I could pay it off.
When school started, my income became very limited. I only had money to pay for rent and food, nothing else. As a result, I let the credit card go and have never really answered the creditors' phone calls. A couple days ago, a new phone number started calling me and I think they sold my debt to a collector. I do not know what to do. Right now, I could only afford to pay $50 a month at the most. I am so confused and feel so helpless. Please help me.
Ventura County Star
P.S. I will never do this again. I definitely learned my lesson. Thank you. — Jess
Dear Jess: When I first began giving credit and debt advice, I coined a phrase. At the risk of having my wife roll her eyes, let me pass it on to you: "Debts, unlike wine, do not improve with age." Your letter is an excellent example of this premise. In fact, usually the problem just gets worse. In your case, the amount that you owe continues to grow each month with interest charges and fees due to the fact that you are not making a payment.
One common misconception is that once you stop making payments on your credit card debt, and it is written off or is turned over to a collection agency, any applicable interest charges and fees on the account stop. That is incorrect. The terms for the account remain in effect when the debt is sold to another company.
So the balance on the account is accruing interest each month and most likely a late payment and over-the-limit fee each month. By ignoring the debt, you now owe more than the original $2,500 balance, probably a lot more.
For all practical purposes, this debt will not go away. Some people might tell you there is a statute of limitations on debts, and there is. However, if you are planning on living a normal life between now and the expiration date of the debt, which may be years away, then you have to deal with it. That means dealing with the collector. As difficult and painful as it might be to deal with your collector now, it will be better and cheaper than waiting for a court summons and dealing with it then.
Here's my advice: First, figure out how much you can afford to pay back each month. Don't just use your current income and expenses. Try to free up money by cutting back and add to income with a part-time job or some other work. Consider selling some stuff to get a decent good-faith down payment in hand. Next, call the collector and agree on a repayment plan. Be careful not to over-promise just to get off the phone. Get your arrangement in writing to be sure that you both understand it.
Keep in mind that collectors have to follow rules. One rule is that they cannot use abusive language on the phone. If you are unable to reach a workable solution with the collector, I would suggest that you call the original credit card issuer and try to work with it directly. If this fails, contact a reputable credit counseling agency and let it help you resolve the situation.
Tackling the problem instead of ignoring it will alleviate your feelings of helplessness and you will feel much better about the situation.
Good luck!
P.S. I'm glad you have learned your lesson. As financial problems go, this is not a big matter. How you handle it is.
— The Debt Adviser, Steve Bucci, is president of Money Management International Financial Education Foundation and the author of "Credit Repair Kit for Dummies." Visit http://www.moneymanagement.org or call 1-877-311-2227 for debt advice.
2006 © The E.W. Scripps Co.
College Student Credit Card Advice
posted by News at 4:01 AM
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