College student can't pay off his debt
May 17, 2010 7:10 AM   Subscribe

I'm 21 years old and can't pay my credit card bill & have some questions...

Basically, I'm a 21 yr old college student and can't pay off the $487 on my Capital One card. I was making payments of $15 a month until I forgot a payment an they billed me up the ying yang. That especially pisses me off because they basically just undid the last 4 months of payments!

I have even less money now and can't make the payments anymore. I have two questions: How much damage is this doing to my credit? And second, can they just keep billing me late charges continuously until my fees are in the thousands?

And before anyone asks, my credit card bill is NOT Xbox live, porn mags, and beer. It's socks, textbooks, and food...
posted by ascetic to Work & Money (25 answers total) 2 users marked this as a favorite
Short answer: yes, it's harming your credit.

Long answer: call up the credit card company and try to negotiate a lower interest rate. If that fails try to get a loan from a bank, a credit union, a family member, etc., which charges a lower interest rate, pay off the credit card debt in its entirety, and then pay off your lower interest rate loan.

And, going forward, never, ever, be late with credit card payments.
posted by dfriedman at 7:16 AM on May 17, 2010 [3 favorites]

Unfortunately, yes, this is something they can basically do. More unfortunately, it doesn't sound like you adequately understood just how burdensome double-digit interest rates can be. At $15 a month, it would take you three and a half years and a total of $630 to pay off a $485 debt.

But call them. They want their money, but because they want their money, they aren't entirely unreasonable when it comes to negotiating about fees for people who have been faithful about making payments in the past.
posted by valkyryn at 7:17 AM on May 17, 2010

if you don't pay it, in a few years it will become many, many thousands of dollars from 'interest' and 'late fees' and be sold to five or six different companies all of which will threaten to sue you but never will and it will give you a horrible credit rating. At some point, they might stop if you move or never respond to the mail and phone calls. And then in 7 years, it will vanish from your credit report.

If you plan to need your credit score any time in the next 7 years, don't open any other credit cards, close any that you have and ask someone for help paying that one off and don't get another one until you make so much money that paying it is easy.
posted by jardinier at 7:18 AM on May 17, 2010 [2 favorites]

I have even less money now and can't make the payments anymore. I have two questions: How much damage is this doing to my credit? And second, can they just keep billing me late charges continuously until my fees are in the thousands?

They can cause you a world of trouble if they want to.

Is there any way you can take a temporary, part-time job to go straight towards this bill? $500 is 100 hours @ $5 an hour, so dishwashing, manual labour, etc. can help you pay this off in months, not years.
posted by Hiker at 7:20 AM on May 17, 2010

This is generally bad idea, but I did it during college myself.

Try to find a credit card that offers 0% interest on balance transfers for X months. Get it and transfer all your balance to that card, then continue to pay what you can manage and cancel the old card. Repeat if you must, but I think it is becoming an increasingly hard trick to pull off.
posted by Menthol at 7:21 AM on May 17, 2010

Call them up and see if they can lower your interest rate and undo the charges.

I once missed a payment on a credit card bill and when I called, they said that they could credit the charges back to me on the next statement "as a one-time courtesy" and then they offered to lower my interest rate. So, call them up, say that you've been a good customer, paying your bills on time every time until this one mix-up, and ask what they can do for you.
posted by Meg_Murry at 7:26 AM on May 17, 2010 [2 favorites]

I don't mean to be unhelpful, but I think your starting point shouldn't be "what happens when I can't pay off my debt" but "what's the most effective strategy for paying off my debt quickly."

nthing the advice above, there are four things you should do:

- talk to your credit card company; try and negotiate a lower rate (best case), a payment holiday (better than nothing) or anything else that helps you get back onto paying off your debt.
- try and switch the loan. Credit card rates are horrendous. If someone can loan you the money at a lower rate then it might be worth considering. Credit card debt is among the most punitive debt you can have
- cut your spending: it is painful, but even at $5 a month, you're basically saving $10 in the long term
- increase what you pay off: as above - at $5 an hour wage, just finding an additional 2 hours a week gets you to more than $40 a month. $15 a month isn't really paying off the debt. You're doing little more than servicing the interest.

I appreciate this is easy to say, but what you've got what should be a manageable debt and the options you're pursuing - very slow payback and trading your debt for a crappy credit score are not the best options.
posted by MuffinMan at 7:30 AM on May 17, 2010 [2 favorites]

This is what credit cards do. As a solution to the problem of not enough money, they are pretty lousy.

Everything about what they can do is written on the back of your statement - has to be, by law. It's hard to understand, though, so you might want to start looking around the net for the abundant resources on how to manage credit.

Those 0% offers are rarer and rarer. I used to play that game in my early 20s, but they don't push cards the same way they used to, because of defaults and because of regulation.

So I agree that calling the company is the best way to go. They will negotiate with you. Usually they cut off the use of the credit and lower your max to whatever your balance is, so you can't use the card any more anyway. Then you'll agree on a set of monthly payments you can make and come up with a payment agreement. For right now, $15 might continue to be reasonable. There has to be a way for you to make $15 a month no matter what your situation. Whenever you are able to, pay more than the minimum, even $5 more, so you don't end up paying so much more than the original debt. Everything you can put toward it now is more real money in your pocket a year or two years from now.

Not to be harsh, but I think you don't understand credit cards yet. This is what happens with all of them, and Capital One is actually one of the nicer companies. I screwed up in exactly this way in college, only I got in a lot deeper and eventually landed in credit counseling. Don't open up any more accounts until you've got this one paid off. You can't imagine what a world of misery you can end up in when every dollar you earn has to go right back out the door to pay for interest and for the barely remembered socks in the long-ago past. Today's convenience just isn't worth tomorrow's misery.

If you need textbooks and can't afford them and can't find a job to pay for them, you could try the time-honored trick of checking them out of the library and continually renewing them, or you could go to the Dean and explain your hardship. That's what your Dean is actually there for, to help you get over obstacles in the way of your education.
posted by Miko at 7:33 AM on May 17, 2010

Credit card debt is a terrible idea for a college student. Try to get that debt transferred to some other kind of debt, such as a debt to parents, friends, or a student loan. Credit card companies don't have a program for "I need a small amount of money, but I can pay it back 4 years from now." Well, they do, but it looks more like something Tony Soprano would offer than anything reasonable. I didn't have a credit card in college and I'm glad I didn't because I couldn't have paid it either.
posted by TeatimeGrommit at 7:38 AM on May 17, 2010

And before anyone asks, my credit card bill is NOT Xbox live, porn mags, and beer. It's socks, textbooks, and food...

Can you get a student loan, even a private one? Get it and pay off the credit card completely. Do not use the credit card again.

Your credit score at this point is the least of your worries. The fees and interest credit card companies rack up on these sort of things are really criminal.

Student loan departments have a really quick turn around too.
posted by geoff. at 7:39 AM on May 17, 2010 [1 favorite]

I don't think it's a wise idea to assume that because an adverse credit rating may disappear from your credit record in 7 years that it's OK to roll the dice. More and more debt collectors are going after debts that are far older than 7 years.
posted by blucevalo at 7:40 AM on May 17, 2010

Can you get a student loan, even a private one?

Well, unless you decide to treat a student loan like it's a credit card. If you do the same thing with repaying a student loan that you're doing with the credit card the student loan debt will follow you to the grave. Student loan debt (especially private student loan debt) is not dischargeable in bankruptcy, unlike credit card debt. Credit card debt is a horrible burden, but student loan debt is potentially even worse.
posted by blucevalo at 7:43 AM on May 17, 2010

Yes, they can continue to charge you interest until you pay off the bill.

Late payments damage your credit rating. Defaulting -- just not paying -- does serious damage to your credit rating. Presumably, you do not want to leave college and enter the workforce with a trashed credit rating. That will make it noticeably more difficult to do things like get a car loan,rent an apartment, or even get a job because prospective employers may check your rating, too.

Meanwhile, the interest and penalty fees keep accumulating.

I would take a two-pronged approach: First, call the credit card company and ask if they can reduce the interest rate or turn off the penalty fees in return for your making regular payments. Second, you need to find the money to make those payments, even if the company refuses to roll back the interest and penalty fees. That could be a job that could be a loan, that could be help from the family.

Bottom line: You need to pay it off or it will just keep festering. However, it's better to learn this lesson in college with a $427 debt than 10 years later with a $427,000 mortgage.

Get a plan to pay it off, stick to the plan, and then move on with your life. Wallowing in worry and stress about debt is no fun (we've all done it), so give yourself a break once you know how you're going to manage it.
posted by justcorbly at 7:47 AM on May 17, 2010

First of all, 1 month late on one card isn't likely to cause many problems with your credit. But if you go more then one month, it becomes a problem.

If I were you i would try to get your parents to bail you out. $487 isn't worth ruining your credit over.
posted by delmoi at 7:50 AM on May 17, 2010 [3 favorites]

The first thing to do is cut up that card so you can't use it anymore.

The second thing to do is pay it off however you can, as quickly as possible. I know it's tough to make ends meet in college, but you can't just let it build up and up and up indefinitely. It's not going away. Cut your expenses and put as much money as you can toward the card. If you think there's a chance your family will help you, ask them. You don't need this stress and believe me, it's only going to get worse if you let it sit there.
posted by something something at 8:05 AM on May 17, 2010

Don't take out a private student loan to pay off your credit card debt. In a lot of cases, the private lenders charge interest rates almost as exorbitant as the credit cards, and the student loan debt can never be discharged.

I remember being 21, in college, and not being able to work enough hours to pay all my expenses. So, I also racked up credit card debt on textbooks and food. Turns out you just can't do that. It doesn't matter in the end whether you spent the money you didn't have on Xbox or on noodles -- Capital One doesn't care what you spend it on, as long as you pay them back. Your credit score will be equally fucked just the same if you don't pay them.

I'm almost 27 now, and I'm still dealing with my horrible credit cards (every frigging time I get down to zero, some major catastrophe happens and I'm back at square one), and so I've gone pretty much onto a permanent austerity plan. Case of beer now and then? No. Out for lunch once in a while? No; even if you forget your lunch, just go hungry. That'll remind you that you'd better remember your lunch in the future. Coffee on the way to class? Only if you brewed it yourself, in your own coffeepot. Need some clothes? Goodwill. TV and Internet at home? Hell no. What's for dinner? Greens, beans, rice, peanut butter, eggs, spaghetti: anything cheap and reasonably healthy. You get the picture. You aren't in as deep over your head as I got, so it isn't going to be as hard for you to get rid of your debt. Just figure out how you can totally slash your spending in order to get the debt paid off. See if you can work a couple extra hours a week. See if you can cut your grocery budget, and/or eat at home (or the dining hall or whatever) instead of going out to eat. Sell anything you own but don't actually use. Then, when you've got the $427 paid off, make a plan about how to never have to deal with that again. Being in debt really, really sucks.
posted by kataclysm at 8:15 AM on May 17, 2010 [6 favorites]

All of the above. See if you can get a part-time extra job--mowing lawns, babysitting, moving furniture, security guarding, whatever--and use that money exclusively and pay the card off in full ASAP. Stop using the card and just use cash. $400-something bucks is manageable right now, but will be unmanageable in just a few months.
posted by Elsie at 8:39 AM on May 17, 2010

That especially pisses me off because they basically just undid the last 4 months of payments!

Hate to be a stickler, but they did no such thing. They, presumably, followed the policies outlined when you accepted the card. Had you done the same, you wouldn't be in this mess.
posted by dobbs at 9:11 AM on May 17, 2010 [1 favorite]

There's a handy one pager from the FTC that outlines all the options:

Also, bankrate has a pretty handy credit card calculator:
posted by cheez-it at 9:46 AM on May 17, 2010

Don't get into debt with another loan to pay off this loan. Fortunately it is only $500 and you can pay it off. It means you will have to WORK to earn $500 ASAP and this will teach you why you should never use credit cards again in your entire life. Pick up some gigs on Craigslist, mow some lawns, sell some blood or your video games/DVDs...whatever it takes to hussle up the money you need to pay off the card NOW.
posted by MsKim at 9:50 AM on May 17, 2010

If you're only a month behind, get on calling them right now. Explain the situation and attempt to work out a fair solution. As someone who over did it with credit cards in college I know how tough it is to make the payments. As others have already said, ruining your credit over $400 isn't worth it. Make some sacrifices, sell some things, give plasma, get a part-time job, etc. Anything to pay them back, because your going to be in a world of trouble with your credit score if you continue to skip out on paying. If you think that the phone calls are bad now (if you're getting them), just wait, they get a whole lot worse when your debt is sold off to 3rd party debt collectors.

I paid off over $12,000 in credit card debt I incurred during college, it took me 3 years to do so, but in the end it was worth it. I put just about every cent I had above and beyond the essentials to pay those cards off, but I did it. I had to work with the creditors to get a "fair" repayment plan (reduce the interest rates, drop late fees, suspend account so I couldn't keep spending money I didn't have), and believe me it was painful, but it was worth it as I didn't completely destroy my credit and I was able to fulfill my obligations to the lenders.

The first step is owning up and calling Capital One, they can't help you remedy this situation until you ask them to.
posted by ganzhimself at 9:55 AM on May 17, 2010

You must find a way to make your minimum monthly payments. There is simply no way around it, aside from getting someone else to bail you out. Some ideas for extra cash are here. If you're a student, nude modeling or plasma donation may be good, non time-consuming ways to come up with that $15 or so.
posted by kitcat at 9:55 AM on May 17, 2010

"And before anyone asks, my credit card bill is NOT Xbox live, porn mags, and beer. It's socks, textbooks, and food..."

The problem is, it doesn't matter what's on your credit card. It could be an Xbox and porn, or it could be relief supplies for earthquake victims in Haiti. It doesn't matter. It's stuff you bought using a loan from your bank, and you have to pay off that loan. Credit from the bank is a loan where you borrow more every time you use the card.

This part is important: $15 a month isn't going to pay off a credit card unless you either carry a zero balance and only put $15 on the card each month, or you don't use the card at all and the $15 chips away at the total that you owe each month... but even then, the total balance will INCREASE each month as the bank tacks on interest. Those minimum monthly payments don't really pay off the card. They just keep your account from being in default.

I have two credit cards and I use them, but I pay off the balance each month - yes, I pay off the entire balance each month - because it's ignorant to pay interest on stuff I already bought. But that's where most people screw up. They think they can buy stuff and then make tiny payments on the credit card. That doesn't work because a $50 textbook will really cost $75 to $100 if not more if it was bought with a credit card as the interest piles up.

If you can't afford your minimum payments, you can't afford to use the card. You need to take it out of your wallet and store it somewhere safe where you can't use it.

Best of luck.
posted by 2oh1 at 11:20 AM on May 17, 2010 [1 favorite]

Don't take out a private student loan to pay off your credit card debt. In a lot of cases, the private lenders charge interest rates almost as exorbitant as the credit cards, and the student loan debt can never be discharged.
My student loans are all between 3-8% right now. Rates were very low at the time, but federal student loans are and always have been very cheap.
posted by delmoi at 5:35 AM on May 18, 2010

Hate to be a stickler, but they did no such thing. They, presumably, followed the policies outlined when you accepted the card. Had you done the same, you wouldn't be in this mess.
Their policies are to rip off the consumer as hard as possible. In fact a lot of the crap they pull is about to get banned, made illegal in the upcoming financial regulation.

In particular, one thing they are going to try to ban is allowing the interest rate including fees to exceed a certain rate. So if you have $400 in credit card debt, they wouldn't be able to add more then, say $6 a month (or $80 a year) if your APR was 20% no matter what. No matter how late you are in paying, whatever.

(The max rate will be set by the state you live in, whereas now the max rate is set by the state with the bank (so they all are based in Nebraska, which has the highest rates specifically for this reason, there laws were basically written by Citibank lobbyists))

It's all in an amendment to the current financial reform bill.
posted by delmoi at 5:41 AM on May 18, 2010

« Older Preschool, newborns, and immunizations: beyond...   |   Please don't make me call FIFA Newer »
This thread is closed to new comments.