Getting a Credit Card
Signing up for a credit card is
something that every student starts thinking about once they
hit university or college. Not only are students bombarded by
the different banks on campuses selling the virtues of their
respective cards, they are also receiving advertisements on
a weekly basis in the mail. It is important to first figure
out if you should get a credit card, and how to manage it properly
if you do get one.
Should I get a credit card or
should I stick to cash and Debit Cards?
Great advantages to getting a credit
cart for a student:
It is very important to build up
your credit rating. Your credit rating is important once you
finish school for such issues as taking out a personal loan
at a bank, getting a business loan, taking out a mortgage, car
financing, or even simply to get a credit card. A credit card
will help you establish that credit line. Banks have much easier
policies about issuing credit cards to students than unemployed
graduates, so you might want to take advantage of their policies
while you are still a student. However, getting too many cards
will actually damage your credit rating. Make sure you never
own more than 2 or 3 cards at any one time, since banks will
tend to view this as you "over-extending" yourself.
If you want to make a sizeable purchase
and you do not have the cash available at that particular moment,
a credit card is a godsend. You can still make your purchase
and pay it off in installments whenever the money comes in.
Just be aware of the high interest charges. Also, carrying a
balance on your credit card (not paying the full amount) can
actually damage your credit rating.
There are some things you cant
do without a credit card. A car company will usually ask you
for your credit card number when renting vehicle as a safeguard
mechanism, and a lot of video stores do the same. For many merchants,
a credit card serves as an important piece of identification
even if you dont use it to make the actual purchase.
Furthermore, major credit cards are accepted most places, reducing
your need to carry cash. If you lose your wallet, the damage
is less if you werent carrying $200 on your way to the
beer store to buy the keg for the party (although your friends
might still get pissed that you didnt end up getting the
keg). The diminished need to carry cash is most important when
youre travelling, where there is always the increased
danger of tourist muggings.
A credit card is something very
useful to have in an emergency situation. If you are out of
money and you desperately need access to cash, you can always
count on a credit card to bail you out (that is if you have
not gone over your limit).
Membership has its
Some cards have some great benefits.
For example travel insurance might be an automatic benefit if
you pay for your trip on your card. You may be fully covered
full or at least up to a certain amount by the card which saves
you from purchasing extra insurance. Then, there are the infamous
Air Miles, and tons of other promotions. Take advantage of the
More and more transactions can now
be executed on the phone or on the Internet. You can find some
great deals on airfare, books, computers, concert tickets and
much more. If you want to take advantage of these specials,
you will have to do so using a credit card. Some people are
still weary, not without reason, about releasing their credit
card numbers for fear of all-too-common fraud. However, if youre
dealing with a reputable company, the security measures in place
make Internet and phone purchases as safe as live purchases.
Disadvantages to owning a Credit
Like everything else about being
a student, you must be able to exercise self-control. If you
have a predisposition to overspend your budget, you will definitely
do so with a credit card. It is easy to lose track of your spending,
and to think of things as "free", when using a credit
card. It is only when you get your monthly bill that you shriek
in horror. And since you probably will not have the money to
pay it off right then and there, the bill will add up until
the balance is gigantic. At that point, the interest kicks in,
and youre paying for your own shortsightedness. Keep track
of your spending. Pretend you actually paid cash, and earmark
the amount in your bank account, and dont spend it. That
way, when the bill comes, you know in advance how much it is,
and youve already put the money aside to pay for it.
Interest rates on credit cards are
astronomically high, ranging between 16-18%. This is how credit
card companies make all their money. If you are carrying a balance,
the interest costs are going to seem like throwing good money
into the garbage. Credit cards are fantastic, if you learn not
to abuse them. Spend within your means, and dont carry
a balance. Just sit back, and watch the Air Miles add up.
Some cards have annual fees. They
provide good service and higher limits in return, but dont
get these unless you need them. There are plenty of free ones
out there, too.
Q & A How to Go about
Q: How do I qualify for a credit
A: You must be at least 18 years
old. You must be able to show that you have a regular source
of income, whether it be during the school year or during the
summers, and a good record for timely bill payments. You will
have problems however if you have defaulted on other loans (and
cards), bounced cheques, or if you are still being chased by
the Columbia House collection agency (for the money you owe
them on that last Vanilla Ice CD). If you are having trouble
qualifying, you might have to get your parents to co-sign or
guarantee your application.
Q: How do I know what card to choose?
A: As a student, with little credit
history, you will not have as much choice as when you will be
in the working world. Itll be near to impossible to get
a Visa Gold or a Platinum Amex card. But look around, as there
are a lot of plans specifically designed for students; so there
should be something suitable for you. There are cards that give
you points towards a purchase of a car, and others that have
low monthly interest rates. Dont content yourself on the
first one that comes your way. Seek advice. Ask a lot of questions
concerning fees, payments etc.
Q: Can I use my card to buy whatever
A: This is the beauty behind the
card. You buy now to pay later. Plus, most retailers accept
some type of card. However, the last thing you want to do is
overspend so that your monthly minimum payment requirement is
just covering the interest charges.
Your credit card will be worthwhile
if you master it and control it, and not the other way around.
Avoiding debt altogether is the basic gist of proper credit
card use. Remember to stay within your budget. If you master
this, a credit card can only be to your advantage.