The Average College Student Credit Card Debt — and How to Tackle It
Credit cards can be beneficial for college students, but they can also lead to substantial debt. Fortunately, there are alternatives.
July 30, 2022
The median earnings of those with a bachelor's degree is $1,344 a week, or roughly $69,888 a year — 66.13% more than the median earnings of a high-school graduate. But despite the long-term payoff, college students still need to figure out how to cover their expenses in the short term. Often, that means turning to credit cards to get by. But how much college student credit card debt is normal?
Below, we'll explore the average credit card debt for college students, along with other key statistics about credit card usage. Then, we’ll look at alternatives to credit cards for prospective students and strategies for those who are already struggling with debt.
Average credit card debt for college students
One of the most comprehensive sources on this topic is Sallie Mae's study “Majoring in Money 2019,” which found that the average college student’s credit card debt is $1,183. That's an eye-opening 31% increase compared to the 2016 report.
However, the situation may have become even worse since the pandemic. A 2021 report from AIG and Everfi found that credit card usage has increased in recent years. They found that 52% of card-holding students used two or more credit cards in the period surveyed, compared to 41% in the previous period. Plus, 15% of respondents had credit card debt of more than $5,000, compared to 9% previously.
A study from College Finance published in 2021 found the average college student has more than $3,280 of credit card debt, suggesting that the pandemic may have pushed the numbers up.
You might think this doesn’t sound like much considering American households carry an average credit card balance of $6,270. But you have to consider that college students generally have limited incomes, meaning they’re more likely to struggle with debt management.
Their limited cash flow may make it hard for them to afford more than minimum monthly payments. This allows interest charges to compound and can result in growing credit card debt alongside student loan debt.
These combined debts can put a strain on the personal finances of young people and make their professional lives after graduation rough, with lots of difficult financial decisions along the way.
As you’ll soon see, there’s a light at the end of the tunnel. But first, let’s dive deeper into the financial lives of college students.
How college students use their credit cards
The average college student’s credit card debt is an attention-grabbing figure, but it’s important to put credit card usage into context.
According to a College Finance survey, college students use their credit cards for:
Online purchases (70.1%)
Eating out (50%)
Products within the categories of alcohol, marijuana, and nicotine (10.5%)
This suggests some students may rely on their cards to cover basic living expenses, but other cardholders may be using their cards for nonessential purchases.
Why college students get credit cards
Indeed, many college students have noble intentions when getting their first credit cards. According to College Finance’s research, a whopping 52.4% of college students got their first credit card to build credit.
While federal student loans eventually aid college students in building their credit history, having a credit card on their credit report will help avoid the problem of being college graduates with no credit score — which can make financing a car or home significantly harder.
However, the biggest motivation for getting a card was “wanting one for themselves” — a reason chosen by 56.7% of participants.
Other reasons college students get credit cards include:
Learning good credit habits (35%)
Taking the advice of their parents (32.8%)
Preparing for emergencies (23.7%)
How college students choose their first credit card
As you become more established in life and have a better grasp of financial goals, choosing the best credit cards for your needs becomes relatively simple. As a young college student, though, finding the right credit card company can be a struggle.
The Sallie Mae study shows that many college students (35%) chose their first credit card based on their parents’ recommendations. The next-highest determining factor was how easily different credit card issuers would approve them. However, students may be getting savvier; the College Finance study showed that 76.1% value perks like cash back.
How college students pay their credit cards bills
How you pay your credit card bill says a lot about your life goals and financial sense, and today's college students are mostly on top of things. The majority of cardholders (60%) that took part in the Sallie Mae study said they pay their credit cards in full every month. This allows them to take advantage of credit card rewards like cash back while avoiding interest charges and late fees.
Also, 26% of students said they plan to make more than the minimum payment on their credit card to pay off debt quicker and save on interest charges.
Of those surveyed, 30% of college students rely on their parents to pay their credit card bills. That's an increase of five percentage points from Sallie Mae's 2016 report.
Credit card alternatives while in college
Turning to credit cards during college may help build credit and give you flexible funds while you focus on your education, but it can also lead to starting your post-grad life with college student credit card debt piled atop your student loans.
The average credit card debt for college students might pale in comparison to the average student loan debt of $28,950, but unlike most student loans, credit cards have extremely high interest rates.
So, where should you turn if you’re looking for an alternative? One option is to use your debit card. It’s just as easy as using a credit card but prevents you from spending more than you can afford.
If you need to borrow money to cover your expenses while you're in college, here are a few alternatives to credit cards.
It’s a wise choice to use grants as your primary source of money to get through four years of college. They take a front seat to all other financial aid because you generally don't need to repay them.
These are often small awards — a few hundred to a few thousand dollars — but you can apply them to your everyday expenses at school, including buying school supplies or a meal plan on campus.
Federal student loans
Another financial resource at college: federal student loans. These carry relatively low interest rates — rates range from 4.99% to 7.54% as of July 2022 — so they can be cheaper than credit cards.
Plus, you can use student loan funds to pay for anything school-related: room and board, meal plans, books, school supplies and more.
Because of repayment deferral rules, these loans may not immediately help you build your credit score, but once you start making on-time repayments, your payment history will improve, which should also improve your credit score.
With all the news about the ballooning average student loan debt, you may be wary of taking on more student loans. That said, with student loan interest rates being a fraction of credit card interest, it's an alternative worth considering.
Private student loans
If you've maxed out your federal student loans, you still don't need to turn to credit cards for daily expenses. Instead, you can look to private student loans to help cover them.
Private student loans typically have higher interest rates than federal loans — currently, their fixed interest rates range from 3.24% to 13.95% — but they are generally lower than credit card interest rates.
Private student loans often lack the deferment options federal loans offer, so you may have to begin repaying these loans while you're in school. The benefit to this is that on-time payments can help build your credit score.
If you're planning to use a credit card to start building credit, you could consider a credit-builder loan instead. With a credit-builder loan, a lender deposits cash into a bank account it controls and doesn't release the funds until the borrower pays the loan in full.
You make monthly payments to the lender until you repay the loan, and the lender reports your payments to all three credit bureaus — Equifax, Experian and TransUnion — to help boost your credit score. Once you repay the loan in full — the typical credit-builder loan term is six to 24 months — the lender gives you access to the loaned funds.
Because there’s minimal risk to the lender, these loans are often one of the few ways people with no credit score can start to earn good credit history.
How to manage college student credit card debt
If you’ve already found yourself with credit card debt, it may be too late to try the alternative methods outlined above. However, you can still take action to get your finances in check.
Your first step should be tracking your spending — chances are, you’ll notice a few unnecessary expenses or subscriptions you don’t use. Based on what you find, you can trim your spending and form a budget.
A popular budgeting method is the 50/30/20, which involves you dedicating 50% of your income to necessities, 30% to wants and 20% to savings or debt payments. However, you can tailor this to your situation.
This can help you to repay your credit card debt over time. But to make the process easier, you may want to consider a balance transfer card that charges 0% interest for a grace period (usually up to 18 months) and gives you a window of opportunity to pay off debt without worrying about accumulating.
However, balance transfers come with some drawbacks. You may end up with a higher APR than you had on your initial card once the 0% interest period ends, and fees for transferring can be high (typically 3% of your balance).
Start building your credit on the right foot
While the average credit card debt for college students may not sound high at $3,280, it has been on the rise and can mean starting off on the wrong foot financially. If you’re unable to pay off your balance each month, the compounding interest can lead to growing debt through your college years.
Alternatively, students have other financing choices, such as grants, student loans and credit-building loans. Meanwhile, those already struggling with credit card debt can get it under control through budgeting and options like balance transfer cards.
Another option is the Tally† credit card repayment app, which allows you to pay off your high-interest credit cards. Not only will qualifying applicants typically get a lower interest rate from Tally, but they’ll also make just one monthly payment and Tally will distribute payments across the cards.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.