College is all about new beginnings; from getting into your dream college to getting your first credit card. Credit cards are fun, easy ways to make your college life easier but they are also a huge responsibility and a great way to learn money and finance management. The correct credit card use can help students build a strong credit score, learn the value of deadlines, and budget. In this blog, we will explore the best ways to use credit cards for students, their importance and how you can build a strong credit score by changing your purchasing habits!
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Why is a Credit Card Important?
Having a credit card has multiple benefits. A credit card makes all of it available from the easy availability of credits to flexible EMI options. One of the major advantages of using a credit card is its easy access to credit as it functions on a deferred payment basis. This implies you can use your card now and pay for your purchases later. It also offers several benefits and incentives for students who are planning to pursue higher studies. Students can avail of these benefits and schemes only if they are active users of credit cards. In addition to these, Credit card use also offers additional protection in the form of insurance. Credit cards are definitely a boon for students. For instance, if a student has to make an urgent purchase, but the funds from parents or a scholarship is not enough then in this situation, a credit card can be of major help. However, students must be aware that while careful management of their credit cards can ease their student life, mismanagement can cost them heavily.
Tips to Use Credit Cards for Students
Here are few tips that students must keep in mind while using credit cards –
Choose a Credit Card After Careful Analysis
Different banks have different schemes for students who wish to avail of credit cards. However, while choosing a credit card, students must make it a point to carefully analyse their spending and check if there’s any credit card scheme that suitably benefits them. Students must look for a card that provides benefits to their student-specific lifestyles, like no annual fee, cash backs, travel benefits, and late payment leeway. It should also provide a variety of options to redeem reward points. Students must make it a point to carefully understand all the terms and conditions of credit card use as this knowledge would help them efficiently use their card in avoiding undue expenses or penal charges.
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Clear Your Bills on Time
One of the golden rules for the correct management of credit cards is to pay off or clear bills on time as this can help in building a positive credit history. However, if students don’t pay their bills on time, they end up getting trapped in a debt cycle. Payment history is one of the main factors determining credit scores, so students prioritise paying their credit card bill by its due date. To do so, they can set up automatic payments to help avoid missing deadlines.
Students must know that having a credit card is not enough. Students must also know how to spend wisely. While using a credit card students must spend only an amount that they can afford to pay by the payment due date. They should never use credit cards to purchase things that are beyond their budget.
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Check Credit Reports Regularly
What is also important for students who use credit cards is to maintain a good credit history like paying off debts on time as mentioned earlier. This makes the option of getting loans easier for students. It also helps in maintaining a healthy credit card score. A credit card definitely helps students with finances and they must use this powerful financial tool wisely, and build a great career ahead. Students must make it a point to check their credit reports wisely.
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Best Student Credit Cards in India
Here’s a list of options that are considered to be the best for students in India –
- SBI Student Plus Advantage Credit Card
- HDFC Multicurrency Platinum ForexPlus Chip Card
- HDFC Bank ForexPlus Card
- ICICI Bank Student Travel Card
To apply for these options students must meet the eligibility criteria specified by each bank. They must also provide the list of documents asked by the bank.
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What’s the Risk of Using Credit Cards?
Well, the answer to this is a yes. Credit Cards can be very risky and dangerous if not used wisely. It makes one believe they have the money which they don’t. Interest rate charges on credit cards are extremely high. For those who fail to pay debts on time, the interest rate goes up to 35-40% per year. It is true that a credit card definitely helps when one is out of money but it also makes them live an illusion that they can spend beyond their budget.
Credit Cards have the option of Minimum Amount Due which allows individuals to pay 5-10% of the total credit card bill and the rest can be paid later on. However, people often fail to realise that this amount goes up with time. It reaches an amount that is often not payable by loan borrowers. This disrupts the individual’s credit scores and negatively affects the individual’s loan borrowing capacity.
So, this was all about the best ways to use credit cards for students. We hope you found this to be insightful. Planning to study abroad but are confused about the application process and cost of studying? Book a free session with our experts at Leverage Edu today!