Dos and Don’ts of Student Credit Cards

Getting a credit card when you’re a student could be the best – or worst – decision you make. Credit cards obviously come with a number of advantages, and can be especially handy if your cash flow is not always that steady.  However, if you don’t know what you’re doing, or you mistreat your credit, it could lead you into a whole world of trouble. And we’re not just talking about small debts your parents can bail you out of, we’re talking long term debt and black marks on your credit file.  This is why it’s important to think about what you’re doing before you apply for a credit card, and why it’s absolutely essential you know what to do when you have one.

The Application Process

While looking for credit cards can seem tedious, it’s still a good idea to spend some time on it. Don’t just go for the first credit card you see, or one that’s offered to you by your bank. Check out what the rest of the market is doing, so you find the best deal for your situation.  Use a comparison site to compare different cards from different card providers. Read the terms and conditions of each one, and look for any requirements such as minimum income. Don’t apply for a card you’re not eligible for, and don’t apply for more than one card at once.

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Your Credit Score

Your credit score is the first thing most card providers will look at when you make an application. It’s a good idea to check your credit file before you apply, and have any errors corrected. If you’ve not had any credit before, you may have a low credit score, in which case, your application may be denied, or you may have to pay more interest than other cardholders.  It’s worth bearing in mind that getting a credit card when you’re young – and using it wisely – can be a great way to improve your credit score. Just make sure you always pay your bill on time, don’t let your payments default, and don’t go over your credit limit.

Paying your Bill

To save on interest, you should always pay off your bill at the end of the month. If you can’t do this, stop spending so much on your card! If you only pay the minimum repayment on your credit card, it’s likely you will only be paying off the interest – which could mean you stay in debt for years, if not decades.

Making a Budget

Making a budget will be good practice for later on in life. Budget for all incomings and outgoings, and think about what you spend before you spend it. While having a credit card can seem like you have free money – you don’t. You have to pay it all back, with interest.

Getting out of Trouble

While we all like to think we won’t get into trouble with our credit cards, we all make mistakes occasionally. If you do find yourself in trouble with your credit card, you must deal with it as soon as possible. There’s no point putting it off and hoping it will go away – it will keep following you, and it will grow.

If you’re trying to pay off your debt but are having problems with interest, a balance transfer credit card could be a good option. A balance transfer card allows you to transfer balances from existing credit cards, and pay low or no interest on them for a certain period of time. If you go down this route, you have to remember a few things. Do everything you can to pay off your debt while the interest is low, and always know when the introductory period ends, and what happens when it does. DON’T start spending on your old card just because you freed up credit on it. Cancel it if you don’t need it, and only keep it if you know it won’t lead you into further debt problems.

If you can’t deal with the problem on your own, seek advice from someone in the know. Ask your parents if they are good with money, or a debt adviser at school, or speak to a financial adviser for more information.

(Image courtesy of phanlop88 / freedigitalphotos.net)

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