Avoid Back to School Credit Card Debt

Don’t let interest charges increase the cost of going back to school.

What you really want to avoid when you start back to school shopping is to avoid putting any of your purchases on a high-interest credit card. Here’s why…

  1. Let’s say you have one child in elementary school and another in middle school
  2. According to average spending statistics, that would mean you spend about $580 in total for the younger child and $660 for the older child
  3. Your total back to school tab would come out to about $1,240 for the year
  4. But if you put that amount on a credit card with 15% APR and make only minimum payments then you would add over $875 in interest charges before the balance is paid off
  5. So with interest and finance charges added on, your total back to school expenditures would be over $2,100

Additionally, taking on credit card debt right before the biggest shopping season of the year – the winter holidays – means you’re likely to finish the year in a hole. You’ll be spending the first part of the next year paying off debt instead of making plans to reach your new financial goals.

Can I charge back to school expenses and avoid interest charges?

It is possible to put back to school purchases on plastic without incurring interest charges, but you have to be really strategic in your budget and credit plan in order to avoid increasing your costs. This can allow you to do things like shopping online and taking advantage of credit card rewards programs that may be offered on back to school supplies.

Here is what you have to do to make this system work:

  1. First plan out how much you’ll be spending in total for clothes, technology and supplies
  2. Make sure you have savings or allocate part of the free cash flow in your budget to cover that full amount, even though you won’t be paying in cash.
  3. Ensure that the card you want to use for back to school shopping starts the billing cycle with a zero balance – otherwise, you won’t be able to avoid applied interest charges
  4. Make your purchases throughout the month, avoiding things that will drive your balance higher such as impulse purchases
  5. Before the billing cycle ends – i.e. sometime before the due date stated on your bill – pay off the balance in-full using the cash you had allocated

Using the system above you avoid interest charges while still getting the advantages of making your purchases with a credit card. It will also help ensure that you head into the holiday shopping season with your debt load minimized. This will help you avoid beginning the next year with a holiday debt hangover because you overspent on credit in the fall and winter.