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Student Credit Cards Are A Step Towards Financial Responsibility
By: Morgan Hamilton
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.
About the Author:
Morgan Hamilton offers expert advice and great tips regarding all aspects
concerning Credit Cards. Get the information you are seeking now by visiting
www.getqualitycreditcards.com/types/mastercard_credit_card |
