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How Much Credit Card Debt Does the Average College Student Carry?

Credit cards can be beneficial to college students, but there are alternatives.

Author Justin Cupler
Contributing Writer at Tally
July 7, 2021

Being a full-time college student leaves very little room for a part-time job to make ends meet. While a lot of cash goes into a college degree, there is a payoff. The average college grad with a bachelor’s degree earns $1,248 a week, roughly $64,896 a year — 67.3% more than the average high-school graduate

That long-term payoff may be worth it for some, but college students still need to figure out how to pay for expenses in the short term. Often, struggling college students will turn to credit cards to help them get by. 

Below, we’ll explore the average credit card debt for college students, what they’re using credit cards for and some alternatives to credit cards while in college. 

Average Credit Card Debt for College Students

According to Sallie Mae‘s study “Majoring in Money 2019,” the average college student carries $1,183 in credit card debt. That’s an eye-opening 31% increase compared to the previous 2016 report. 

That may not sound like much considering American households carry an average credit card balance of $6,270.

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Even though the $1,183 may seem small relative to the average American household’s credit card debt, college students generally have limited incomes. This limited cash flow may make it hard to afford more than minimum monthly payments, allowing the interest charges to compound. This can result in growing credit card debt alongside student loan debt

These combined debts can put a strain on personal finances and make professional lives after graduation rough. 

How College Students Use Their Credit Cards

According to the Sallie Mae survey respondents, college students use their credit cards for:

  • everyday purchases, like groceries, eating out, etc. (44%). 
  • online purchases (50%). 
  • big-ticket purchases over time (23%).
  • recurring purchases, like subscription services and monthly bills (32%). 
  • emergencies (11%).

Why College Students Get Credit Cards

Average credit card debt for college students: A student uses a credit card to make a purchase in the bookstore

Many college students have noble intentions when getting their first credit cards. According to Sallie Mae‘s research, a whopping 58% of college students got their first credit card to build credit. 

While federal student loans will eventually help college students build their credit history, having a credit card on their credit report will help avoid the problem of being college graduates with no credit score. Having no credit score can make financing their first car or home significantly harder. 

Other reasons college students get credit cards include: 

  • because their parents recommended they have one (33%).
  • needing an easy way to buy things online (29%). 
  • wanting an alternative to paying cash (28%). 
  • wanting to earn reward points (25%). 
  • wanting one for emergencies or to help them manage their spending (21%). 

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 credit card that best suits you becomes relatively simple. As a young college student, though, finding the right credit card company can be a struggle. 

The data shows that many college students (35%) chose their first credit card based on their parents’ recommendations. The next highest determining factor was how easily they could be approved. 

How College Students Pay Their Credit Cards

How you pay your credit card bill says a lot about your life goals and financial savvy, and today’s college students are mostly on top of things. The majority of these cardholders (60%) said they pay their credit cards in full every month. This allows them to take advantage of credit card rewards and avoid all interest charges. 

Also, 26% of students said they plan to make more than the minimum payment on their credit card, which will help 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. However, it can also lead to starting your post-grad life with even more debt piled atop your student loans. And unlike most student loans, credit cards have extremely high interest rates.  

One option is to use your debit card instead of reaching for your credit card. Using your debit card is just as easy, but it prevents you from spending more money than you can afford. 

But if you need to borrow money to cover your expenses, here are a few alternatives to credit cards while you’re in college.

Grants

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

A college student applies for a loan on his laptop

Another financial resource at college are federal student loans. These carry relatively low interest ratesrates range from 3.73% to 6.28% as of June 2021 — so they can be dramatically 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 surrounding 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 3.34% to 12.99% — 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 the on-time payments can help build your credit score

Credit builder loans

If you’re planning to use a credit card to build credit, you could consider a credit builder loan instead. With a credit builder loan, a lender deposits the borrowed 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 is minimal risk to the lender, these loans are often one of the few ways people with no credit score can begin building credit. 

Start Building Your Credit on the Right Foot

A group of college graduates after the ceremony

While the average credit card debt for college students isn’t overly high at $1,183, it’s important to look at other factors. One key factor is what they use this credit card on and their intentions. And with 58% of college students using credit cards to help build credit, they seem to be on the right path. 

However, 44% of college students use their credit cards to cover everyday expenses, and 23% use them to finance big-ticket items, which can lead to compounding interest and growing debt through their college years.

This is why students could consider alternative financing, including grants and student loans. For those looking to build credit, a smart alternative to a credit card could be a credit-building loan that offers you a lower-risk way to build a good credit report and score.  

If your credit card debt has already become unruly, Tally can help with its line of credit1, 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.

1To 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% – 29.99% per year, and will be based on your credit history. The APR will vary with the market based on the Prime Rate.