Credit Cards

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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:

Credit Rating

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.

Cash Flow

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.

Convenience

There are some things you can’t 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 don’t 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 weren’t 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 didn’t end up getting the keg). The diminished need to carry cash is most important when you’re travelling, where there is always the increased danger of tourist muggings.

Emergencies

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 privileges.

Increased Access

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 you’re 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 Card

Self control

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 you’re paying for your own shortsightedness. Keep track of your spending. Pretend you actually paid cash, and earmark the amount in your bank account, and don’t spend it. That way, when the bill comes, you know in advance how much it is, and you’ve already put the money aside to pay for it.

Interest

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 don’t carry a balance. Just sit back, and watch the Air Miles add up.

Fees

Some cards have annual fees. They provide good service and higher limits in return, but don’t get these unless you need them. There are plenty of free ones out there, too.

Q & A – How to Go about Getting One

Q: How do I qualify for a credit card?

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. It’ll 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. Don’t 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 I want?

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.


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