Finance Tips

Face it — not all students have the advantage of carrying daddy’s plastic. Credit cards for most students are dangerous. It is important to understand and know how to use credit to your advantage so as not to be caught off guard by skyscraper fees and interest rates at the end of the month. Here are some frequently asked questions regarding college student credit:

1. How many students have credit cards?

Over 80 percent of college students have at least one credit card. More then 50 percent of freshmen carry plastic, and by sophomore year, over 90 percent of the the sophomore population have credit cards. Graduate students are no different, most of them carry as many as six cards. Credit card balance is directly proportional to level of education, with graduate students having the biggest credit card balance due to education expenses among the whole student body population.

2. Why are there so many credit card companies issuing cards for students?

Credit card companies know that when students can not pay their balances, they have the parents save them. They also offer attractive interest rates and benefits to college students because college is the time when most people get their first credit cards. Most people stick to their first credit card even after graduation. So, college students are great customers!

3. Are credit cards bad for college students?

Credit cards should not altogether be avoided by college students because they can help them rent a car and get a good car insurance policy, as well as provide emergency funds. Establishing a good credit history is important and needed after college. It is wise to get a credit card while studying and make sure that the credit card is paid on time. College students should also opt for one or two low-limit cards. Using such will be easier for the student to stay within his or her budget and afford to pay the bills on time.

4. What happens when a student cannot afford to pay on time?

Usually credit card companies will increase the interest rates, as well as charge a penalty if a student falls behind on his or her payments. This will leave the student with a bad credit history, and will be seen in the report for as long as seven years. This will affect the student’s ability to acquire future credit such as when he intends to buy a house or a car. Some students opt to enroll as part time students to cut up their work load and free up some time so they can work and pay for their balance. Some stop studying altogether and choose to work full-time to pay for their loans faster.

5. How can students manage finances so as not to fall heavily into debt?

Students should keep track of their money by mapping out a budget and listing all sources of income as well as every purchase and expense he makes. This way, the student will know exactly how much he has spent and how much he still has left.

6. How can you tell if a credit card company is giving you a good deal?

Before signing any contract or application, the terms, interest rates and hidden charges should be understood by the student. Cards that make students pay annual fees on top of the interest rates should be avoided. Students should also look for cards which offer interest-free grace periods provided that they are able to pay during a certain period of time.

7. What is the role of the parents when it comes to their children’s student credit?

Parents should encourage their children to spend money wisely and teach them to handle debt before they start college as much as possible. Some credit card companies offer to issue an extension card for the child of their client. There is even a new plan wherein students are given credit cards and parents can refill it with money, so the students will be able to make cash withdrawals of charges depending on the amount of money their card has. Parents should make their children realize that as much as possible, credit cards should only be used for emergencies – that divine faux fur coat slashed 70% off its price is not considered an emergency.

8. Is taking a cash advance a good idea?

Cash advances should be avoided. Not only will you pay interest from the time of withdrawal, cash advances will leave you with high paying interest rates with no grace period to speak of. There is often also a cash advance fee. Before you know it, you will be in a really big financial crisis should you start making cash advances a habit.

9. Is it worth it to use credit cards in paying for small amounts so that the points will accumulate and I will be entitled to nicer gifts towards the end of the month?

Sure, there are credit card companies that offer gifts depending on the number of points the client has accumulated, but paying using plastic for just about anything should be avoided because you will still have to pay interest rates. It is not worth it to get a nicer gift in the end but accumulate fees and pay interest for little things like a can of Diet Mountain Dew or a pizza. Using a credit card for everyday expenses is a bad habit to form.

10. What are penalty policies?

Should a client fall behind on his payment, credit card companies usually charge sky-high penalty rates and cancel their low-rate offers, so it is important to ask about this before signing up. It could also trigger universal default penalties which could increase interest rates on other cards!

Students should know how to manage finances and should be aware of the consequences should they miss payments of their credit cards before they go to college and apply for credit. It is the key to a financially stress-free life in the future.

Students are often prone to fall under huge credit card debts due to some common mistakes done with credit cards for students. Below are some of the common mistakes that students usually make with their student credit cards.

Students make many mistakes while choosing student credit card. For instance:

Instant sign up for the first card offer:

This is the most common mistake that most students tend to commit. As they step into college, they get many credit card offers from numerous credit firms. If you are not serious about this and just sign up for the first credit card offer, chances are more to lose those good offers coming after a while. Thus, wait and look out for some reasonable offers.

Often, students are attracted by a card offers that offer goodies such as t-shirts, video games, and DVDs. Always try to avoid committing this mistake. You need to understand that these goodies are just promotional offers that hardly ever resist. Hence, always sign up after comparing and reading the terms and conditions of at least three or four credit card companies thoroughly.

Using Beyond the Credit Limit:

This is another common mistake. Often, these credit cards come with a huge credit limit, but this does not imply to spend your entire credit limit. It is important to keep the credit card balances always below 50% of the total credit limit. If you make use of the entire credit limit on expenditures, it may reflect on your credit report. In addition, you will have a tough time to pay off your balances on time, if you get into the habit of spending your entire limit.

Irregularity in Monthly Installment:

This is one biggest mistake, which students do with these credit cards. They ignore their monthly installments or skip them. In such cases, credit firms either increase the APR (Annual Percentage Rate), or charge some penalty fees or withdraw all your rewards and exclusive rights. To worsen, they may even decrease your credit limit. Incurred dues are the common cause of debts due to these credit cards.

Solution:

To avoid these mistakes, do not just read the special features of these credit cards. Spend a little time in reading the terms and conditions found in the respective web site of credit card companies providing these types of credit cards. This way, you can come to know all the charges and interest rates accurately.

Ascertain those web sites that offer reviews on various credit cards for students. These web sites collect all college credit cards available in the market along with their exclusive features.

If you find difficulty in choosing a best student credit card, seek help of financial consultants, as they may give you an informed opinion about the best one available in the market.

Having a student credit card is the first and vital step to build a strong credit history for a student. You need to make an excellent good credit report, since this helps to make a good impression after graduating. Hence, remember your responsibilities and avoid making such common mistakes.

Often, students do not have credit records. This makes it difficult for them to obtain credit cards. In addition, if they are able to obtain, the credit limit is low or interest rates charged are high. At such times, prepaid student credit card is the best option, as it provides flexibility of a credit card and avoids accumulating debts at the same time.

No credit checks or monthly installments are required to obtain such type of credit card. The amount transferred to a prepaid credit card determines the spending limit. You can obtain such a credit card online or from a financial institution.

Uses and Benefits:

You can use this credit card wherever normal credit cards are accepted. If credit balance on the card is low, students can refill them at any time. Methods to refill these cards are through cash or check. Some card issuers also accept automatic account loading on a monthly basis.

With normal credit cards, you are not aware of the amount available on the card. Sometimes, dealers may take a small amount first and charge the full amount later. As a result, an overlimit fee is charged, which results in negative balance.

Hence, students need to monitor their credit balance and transactions on their credit cards, as they have to pay the negative balance. This also helps them to beware about financial stability and budgeting at a young age.

Benefits:

Some prepaid student credit cards allow students to build their credit history. You can apply for such a prepaid credit card, if you have a social security number. Social security number plays an important role in applying for this type of credit card. As a result, they are reported to credit bureau agencies. You need to maintain a positive credit history by keeping the card active and avoiding negative balances. Good credit records help students to get credit cards with lower rate of interest and in getting finances such as loans and mortgages.

Prepaid student cards provide students the flexibility of using credit cards without worrying about card debts. Students learn to maintain economic constancy and develop positive credit history with the help of these cards.

These credit cards function in the same manner as normal credit cards do. You can buy goods and services from different locations with these cards. They look and act as a normal card and are very similar to debit cards. You have to put some money in a pre-determined bank account to make use of these cards. If you fail to put money on the card, you will not be able to use the card.

Other Points To Remember:

Minors, who are unable to obtain cards, can get these types of credit cards. Usually, teenagers use prepaid student credit cards the most to build credit history, while studying.

Some disadvantages of these cards are:

1. There is a monthly convenience fee.
2. You have to pay an interest fee.
3. You do not get a credit.
5. They make it difficult to shop with a low interest rate.

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.

Most people agree that learning to manage one’s personal finances at an early age is imperative. I certainly did not have much guidance in this area when I was studying and between seeing my friends and cramming for exams it did not rate as a high priority! Financial independence is something most human beings strive for yet very little is taught on this subject at schools and universities alike. It is a shame that such critical life skills are rarely addressed in our youth unless our parents are particularly diligent in this area, as many of us have to learn our lessons the hard way.

Whilst at university I observed many of my friends struggling with student credit card repayments. These guys had fallen into the easy trap of spending money they didn’t really have and leaving the worrying for a rainy day. Well guess what? When it rained it poured! One particular friend of mine was spending a lot more on his credit card than he was able to earn each week. I’m sure it was nice buying all those girls those drinks but was it worth the headache of insurmountable credit card interest repayments? This friend still pays to this day for his mistakes as his credit history will not qualify him for anymore credit of any kind. This is quite sad because credit actually can be beneficial to those who manage it appropriately. In fact it could be argued that every human being will need or at least benefit from some type of credit in his or her lifetime. You may know that it is very rare for investors to use their own money in business, instead they leverage the bank’s money to gain profit for themselves before paying the bank back. This an acquired skill and a whole other topic.

So, the question is; should students have their own student credit cards? Despite my rather bleak introduction to this article I would say absolutely yes. I say yes because as I said there are many benefits of having some credit. Also, learning how to manage credit from an early age will set you up to avoid some serious financial headaches in the future. Remember my friend? Trust me, you don’t want to end up like him.

Student credit cards are readily available these days. All major banks will actually have a range of credit cards specifically suited to the needs of the student. Often this might mean reduced rates, student focused benefits, etc. Applying is made very simple by websites like [http://www.uscreditcardguide.com] where you are able to review the best offers from different banks and also apply online for fast and easy approval. Just remember to have your personal financial information on hand so you can fill out the forms correctly.

There are a few reasons I believe it is important for students to have their own credit cards. Firstly I recommend every student have an ‘advisor’. An advisor can be a professional, a parent or family member, or friend with skills in this area. Most college campuses will offer free financial advice to its students as well. An advisor can help you with budgets, understanding interest rates and help you understand your unique situation. It is important to understand your earning capacity and know whether it will allow for credit card repayments.

It is very beneficial to anyone to establish a credit history which banks use to assess further loan and credit applications. If you wish to own your own home you will have to go through this one day and the longer you can show have adequately maintained a credit card and its payments the better chances you will have.

Financial emergencies, which all of us can relate to, will also come up and a credit card can really make things easier to manage these little crises. Often a low limit of $500 to $1000 is all you need to cover some unexpected expense. It is a great feeling knowing you can handle these situations without having to phone home or borrow from a friend.

Simply using credit cards to pay for things and then transferring money from your savings account to cover the costs on your credit card is a good way of earning benefits from your credit card supplier. These benefits will range from frequent flyer points to shopping credits. Check some really cool student cards including the extremely popular MTV Card.