Student life is an interesting time, although tuition along with other living expenses is quite expensive. This causes the occurrence of debts on average by several tens of thousands dollars in two-thirds of students. Many people wonder about should college students use credit cards, if most of them already have such debts.
It is worth considering that these debts are created only by paying directly for college tuition. In addition to study, students have to find opportunities to pay for accommodation, meals, transportation and others. Since most students already have student loan debt, and money needs remain, credit cards become especially relevant for them.
Credit cards can be a good support for the student if necessary. On the other hand, improper handling of this credit instrument will lead to the formation of a deep debt swamp, from which it will be very difficult to get out especially for young people.
So why should college students use credit cards, or is it better not to mess with them? The answer to this question can be positive and often, the use of a credit card is necessary in order to be able to provide the student while studying.
One has only to understand how credit cards work, how debts are formed and what major mistakes should be avoided when using them, so as not to harm your finances. Find out further all the necessary details about this, which will help you make the right decision and will not allow you to wallow in debt.
Why credit cards for college students
A credit card for young people can become educational material for managing their personal finances, planning and controlling income and expenses. With the first credit cards, students can develop these useful skills that will help them become financially secure people in the future.
Also, the very process of choosing the most suitable offer among different types of credit cards will be an important step towards financial literacy. First, you will need to find out what all these financial terms used by lenders in the contract mean, to understand how they work and to compare different parameters of different offers of credit card issuers. You can choose from many options, among which you can always choose the best one for you.
Among other things, another important advantage that leads to a positive answer to the question of should college students use credit cards is that credit cards help build your credit, gradually increasing your credit score when handling a credit card correctly. This is often the start of building a good credit history for beginners.
After graduating from college, you can already have a fairly high credit score, which will help you settle in life in the future. This may apply to rental housing, getting a more responsible and better paid job or any major purchases.
Why against credit cards for college students
With all the advantages of using credit cards for students, unfortunately they have a downside. However, not all of them are definitely harmful for everyone, because in most cases it depends on how you use your credit card.
That’s why, before deciding should college students use credit cards or not, it’s worth understanding how they work and how to use them correctly so as not to run into credit card shortcomings.
The first thing you need to remember is that the extra money that you get on a credit card is not given to you for free. In addition to the fact that you have to return all the used credit money in a few weeks or earlier, you will have to pay the interest rate to the lender even higher. Therefore, you should not thoughtlessly spend an affordable credit, and use it only if necessary.
Although, of course, little can affect the sufficiently high variable interest rates, but competent management of credit funds and timely repayment of the balance will help minimize their negative impact. In addition, the first small mistakes in debt management will help to gain the necessary experience in order to prevent further serious mistakes.
Another drawback is to think that you have extra money. With credit cards, you are essentially borrowing money, but many students forget about it and think it’s free money. College credit cards should be used in an emergency or to improve your credit rating.
Do Not Make These Credit Card Mistakes
Obviously, after learning about the benefits of credit cards for students, most decide that credit cards are worth having to build a successful financial future. But where, then, does such a huge credit card debt come from?
There are several major mistakes that ultimately lead to a rapid increase in debt to large amounts. However, most of these errors can simply not be made without applying special efforts to this. You just need to find out about such errors before solving should college students use credit cards. Learn more about common mistakes college students have when using credit cards.
- Missed payments
Sometimes new borrowers may think that one late payment is fearless and it will not greatly affect the amount of debt. This misconception often leads to the most serious consequences for credit card holders. This is due to the fact that the issuer will definitely charge you a penalty fee for missing a payment, which will immediately increase the amount of your debt. In addition, missed payments affect your credit rating the most, a decrease in which often entails an increase in the interest rate for you. All together leads to a rapid increase in debt, which begins to grow like a snowball.
Student life is full of different events and in this maelstrom you can forget to make timely payments, but this can be prevented with reminders or notifications. Some lenders offer such information via SMS or notifications in the application. You can also set an alert in your smartphone organizer.
- Misunderstanding of the value of a credit rating
After you graduate from college you will need a fairly high credit rating, which is expressed in credit points. Credit points are added or withdrawn depending on what kind of credit actions you perform. A high credit score (approximately more than 700) will help you make large acquisitions on credit, as well as increase your chances of getting a good job.
Your credit rating will determine how lenders perceive you, your chances of getting a loan approval, and interest rates. Therefore, it is important to understand how credit cards work in order to use them correctly and ultimately have a high credit rating.
- Lack of interest rate knowledge
The annual interest rate is what each borrower pays on top of the amount of money borrowed from the lender. As for credit cards, they usually set fairly high interest rates, that are changing depending on what debt amount you have.
Understanding what constitutes an interest rate (or APR) on a credit card, you will first of all carefully choose a credit card with the lowest interest rate, and you will also be more careful about your expenses so as not to create a lot of debt.
- No expense and income planning
In the absence of experience, this may seem difficult to plan your expenses, since there are regular unforeseen expenses and it is almost impossible to take everything into account. However, in fact, this can be done if you constantly monitor your monthly expenses. You can see what you are constantly spending and how much, and you can also understand what expenses you could exclude.
Then, having collected data for a certain period in this way, you will be able to analyze them and plan your expenses for the next month, taking into account all the necessary purchases and credit payments. Remember that it is better to spend less than spend more than you can afford – this will be the key to your future financial success.
- As you can see now, credit cards can help students lay the foundation for their financial future, provided that you understand how it works and how to use them for a good result.
- You will be able to build your credit and get great opportunities to finance your needs in the future.
- Learn the features of credit cards, interest rates and credit ratings.
You can use the information in our financial blog to learn more about different types of loans, as well as about the effective management of your personal money. You can also contact our experts for advice.