Students and Credit Cards

A Student's First Experience with Credit
It is very easy for students to get caught up in the credit card trap. Understanding credit may help you become a good credit consumer and this can set how you deal with credit for life. School or university may be the first experience you have with credit. Banks and retail stores are throwing credit cards at everyone, including students. This comes across students, even those without jobs. The truth is banks and retailers will always be looking for new business and you will always be a prime candidate.

There are two things banks know about offering credit to school and university students:

  1. It is most likely that you will be a customer for life.
  2. If your credit cards fall behind your parents will usually end up paying the balance.

University and school students are therefore good business for some banks. But it is also the perfect time for you to establish a good financial record, by following good credit guidelines from the start.

Look into Different Types of Credit Cards
Visa and MasterCard are probably the biggest credit cards available. A good way to establish your credit rating is to make a small purchase on a normal retail store card each month and then pay off the balance when the bill arrives. This will show creditors that you are not spending beyond your means and that you can handle any repayment obligations. You can then apply for a Visa or MasterCard, which may get you into more debt, but if you follow proper credit guidelines you should be able to handle it.

It is wise to have a major credit card for emergencies only and use it only for that. Unfortunately, you will have to keep it in your wallet all the time and you may be tempted to use it for other purposes. But stay strong and use it only when you desperately need it.

Create and Maintain a Budget
You need to learn how to budget. This is important, particularly to monitor your expenses, even if it is a little complicated.

Start by identifying your income and expenses:

  • Your income is part-time work, money from parents, any government aids, bursaries, etc.
  • Your expenses are university books, entertainment, clothing, meals, and travel.

By putting all this together you should see how much you can afford to spend with the amount of income you have. Set out a simple budget that you can maintain and you will soon have the starting plan for your finances that you can control.

Pay your Bills on Time
Remember, late payments can show up in your credit record. If you make a dent in your payments record, this will affect your credit rating and you may find it difficult to get credit in the future. This applies to all bills, including rent, credit cards and other loan payments.

If you can, send the payment the day you receive the bill, even if it is not yet due. If you find your cash flow is a problem you may need to keep some payments back by cutting out on some luxuries you intended to spend the money on. When you send a cheque, make sure it is paid with enough time to go through the mail. Don’t get into debt at the beginning of your life. Stay out of debt by paying your bills on time and keeping a good credit rating.


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