Student Credit Cards - The Risks

There are also some risks that you should be aware of when deciding if you want to get a credit card. These risks include your own temptation (can you control your spending), interest rates (the money you pay for using credit), and other fees.

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: 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.