Credit card tips for students

Becoming a university student is the first time that many people experience some degree of financial freedom.  One of the aspects of financial freedom is the ability to take on debt, particularly credit cards.

Credit cards can be a good thing for students, but they can also have many dangers.  Student markets are often seen as a good profit making area for credit card companies as students are seen as not as financially aware as older consumers and so are less likely to look at aspects such as fees and interest rates.

The first and most important piece of advice with credit cards is to be careful with spending. This may seem obvious advice but it bears repeating.  Almost all credit card problems arise from overspending.  Care should be taken not to simply pay off the minimum balance every month as this can lead to enormous interest charges over the years.

Two solutions to the problem of overspending are prepaid cards and debit cards.  These cards do not have the chance to build up a large debt, while allowing for items to be bought over the internet.  Although it may not be possible to completely avoid credit cards, it could be possible to use a debit card until the account comes close to zero.

Students may find that it is hard to get credit at all, as they will have sparse credit histories.  One way to get credit is to get a co-signatory card with parents.  This has two advantages.  As well as getting a credit card, it is also possible to use this as an opportunity to get financial advice from parents and to prove the ability to spend wisely and responsibly.

When looking for credit cards, students should look for permanently low interest rates and not rewards.  Rewards are items such as shop vouchers that a borrower gets for either signing up or spending on the card.  Students are known to be particularly prone to sign up rewards and so some impressive looking rewards are offered, while the interest rate is very high.  It is vital to look for a long term low interest credit card.  Credit unions, particularly university based credit unions, are often a good place to look for these types of card.

Problems that can particularly affect students arise from changes of address.  This is due to the fact that students change residence frequently.  It is important to notify credit card companies of address changes or to cancel cards.  This is particularly the case if there are recurring charges on an unused card as this can suddenly “default” at an old address marking down an otherwise good credit record.  It can sometimes be a good idea to take credit cards from the bank so that address changes can be reliably tracked.