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Avoid Back to School Credit Card Debt

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

Back to school shopping is the second largest consumer spending event for retailers. In fact, it’s even loosely used as a predictor for the holiday season.

Now more than ever kids feel pressured to keep up trends, including clothes, technology, school supplies, and whatever else is considered a “must-have” for the coming school year.

On average, parents spend a little over $300 for clothes, shoes and accessories for elementary school kids. And for middle and high schoolers that number jumps to $360. Electronics and computer needs for elementary school students cost about $178. For middle and high school students that number jumps to $230. School supplies for elementary, middle and high school students all come in at about $95-$100.

29% of households with kids age 6-17 plan on spending more than they did last year, and the same is true for college students and their families.

Here are some tips and tricks on how to save money going back to school this year, regardless of the grade:

  • Before you go clothes shopping inventory the kids’ closets first. See what works from last year and only buy the things they really need.
  • Also always check out the summer clearance sales first before you go to full price items.
  • Avoid buying trends. If your kids insist on buying a couple of trendy items have them work for it or use their own money.
  • Also, don’t shop all at once. Buy what you need to start the school year, and then slowly add pieces as the fall and winter clothes go on sale.

When it’s time to go shopping for electronics:

  • Make sure you buy what your child needs, not what they want, and consider getting warranties.
  • Make sure the warranty covers accidental damage and not just manufacturer defects.
  • And also, avoid buying the latest smartphones; they’re really not necessary for going back to school

Buying school supplies can be a lot of fun but it can get expensive:

  • So it’s important to check the published list of school supplies from your child’s school. The list will narrow what you really need to buy
  • And don’t forget to inventory leftover school supplies from last year
  • And remember to only buy in bulk items that the kids will use a lot of, like paper, pencils and pens.

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.