Finance Tips

A recent addition to a college student’s must-haves is a credit card. Along with the cell phone, the credit card is becoming more and more prevalent among young people ages 18-25.

Perhaps it is but natural for credit companies to mine this previously untapped market. More and more products and services are being targeted towards these customers. And the more cool stuff is out there, the more they will want to buy – if not with cash, then on credit.

Unfortunately, the problem with swiping away plastic is just that – students fail to realize that with each swipe they are one step closer to debt, which they may be unable to manage. That is why it is important that the right information on the judicious use of credit cards be made available to students.

That is not say that a credit card per se is a bad thing. In fact, when used wisely, it becomes a smart way for young adults to build their credit history, which they can continue to build on as they becoming self-supporting professionals.

Having a credit card also teaches students financial responsibility – showing them that it is important to live within means. It makes them aware of concepts such as principal, interest, balances and debt. The earlier they get comfortable with these, the better they can cope further on in the future.

On the other hand, young adults can still be prone to financial naiveté particularly when it comes to fine-print terms and conditions. Perhaps in the excitement of being issued their own credit card, they may simply skim over, if not totally forgo, reading the terms and conditions the credit company stipulates over the use of the credit card.

It is possible for someone of that age to be content in knowing that their card offers 0% APR. What they may not be aware of is that the offer is for a limited time only or that if monthly payments aren’t fully paid, a high finance charge will be applied.

Although nearly 80% of college students today own more than two credit cards, it is unfortunate that less than half are able to pay off the monthly balance. This only proves to show how little effort is made to educate students on the right usage of a credit card.

If you’re a student considering getting or already owning a credit card, or if you know someone who does, here are some things to help you get started on learning how to use a credit card wisely and to manage finances in general.

- Consider the nature of your income and how much of it is stable income.
Credit card statements come in monthly. Therefore, you should know how you would get the money to pay for these. Stable income is important because you will be relying on this to make those regular payments. If you don’t have a steady source of income, rethink getting a credit card. Continuing with one in spite the lack of a stable income will run you into debt in no time.

- Observe your credit limit.

Unless you specifically ask for it, a credit company will set the limit for you. To avoid unmanageable debt, your credit limit should be around 25% of your stable monthly income. So even if you’ve topped off your credit, you’ll still be able to pay off the monthly balance. If your credit limit is beyond 25%, call your credit company right away and ask for an adjustment.

- Designate purchases

Credit cards should not be your primary method of payment. It should only be a means to bridge gaps in your cash flow. As early as possible, develop the discipline to limit certain purchases for your card.

For example, it is a practice of some to charge important things such as rent and utilities to a credit card. The rationale for which is that even if the cash income is delayed, payments for the essentials will not. However, the idea is that the balance will be fully paid off by month’s end.

These tips should get you started as you build a good credit history. You may start out small now, but as you learn good financial management early on, in the future, handling bigger things will hopefully be easier.

If you are a parent sending your child off to college, or a college student yourself then you will probably be thinking about securing finances. It is important that you protect yourself from making any huge mistakes, yet also learn the skills you will need in the future. This is why college students credit cards are a great idea for any student.

You may be worried that getting a student credit card as you might just rack up debt from day one. However, these type of cards are actually used as a great learning tool alongside a few emergency funds should they need them. Most student cards will have 0% interest for a set period of time, giving you the time and flexibility you will need while studying. This means you will have much less chance of getting lost in debt.

Having a credit card is a good learning tool to help you to spend responsibly. With a little budgeting, you can ensure that you make their payments regularly and start building that credit history that will be so important once you leave college. Unfortunately this kind of credit history is almost essential nowadays, so it is a great idea to start to build it up early in life.

There are a number of offers out there, so it’s important to research to find one that will benefit you the most. Some college students credit cards will come with free gifts and other great features, but you should not be swayed by the promotions and choose the one that ultimately offers the most long-term benefit.

Traditionally there have been two groups of people who have always found it very difficult to get access to credit cards. These two groups are listed below:

· People with no, or very little income

· People with negative credit histories

These two groups would have found it next to impossible to get approved for credit cards in the past. However, nowadays it is becoming easier and easier to get your hands on a credit card and accordingly, these groups are finding it easier to get access to credit cards.

The reasons for this are that the competition in the UK credit card industry has increased dramatically in recent years. As more and more players have entered the market, it is now possible for almost anyone to get a credit card. Many credit card providers from the US have entered the UK credit card industry while at the same time, there are internet and other non traditional providers who are also all fighting for a share of the lucrative UK credit card market. As a result they are willing to lend to more and more people who in the past would have been regarded as simply too much of a credit risk.

What this means for students is that while in the past they may not have been able to get their hands on a credit card, it is now relatively easy for them to do so. This has many advantages for students as it means they have a means of paying for goods and services online that do not accept the more common debit cards that students have had to limit themselves to in the past. The other main benefit of student credit cards is that they can use them while abroad travelling and this no doubt is a welcome convenience for the student population.

There are disadvantages to having a credit card as a student however. The main disadvantage is that it is very easy to get into credit card debt very quickly. Frequently the spending limits on student credit cards are thousands of pounds and any student who spent all of this would be finding it very difficult in deed to get the money paid off. At the same time, with interest rates among the highest in the lending industry, any student who does rack up a high credit card debt will find the debt increasing rapidly at such a rate that it will surely be unmanageable without drastic steps.

The other disadvantages of student credit cards are dwarfed by the risk of getting into debt problems and therefore, if you think there is any chance that you will not be able to handle the responsibility of a credit card and keep your spending under control, then probably a student credit card would not be the best idea in your current circumstances.

Please remember, using a student credit card is not always a bad idea, taking out a student credit card at a time when you have no previous credit record may be a good idea. This would enable you to build up a healthy credit record, so when you are finally ready to apply for a better credit card that comes with better offers, there is a higher chance that your application will be successful.