Tuesday, August 25, 2009

Student Credit Cards Pros and Cons

Most people agree that learning to manage one’s personal finances at an early age is imperative. I certainly did not have much guidance in this area when I was studying and between seeing my friends and cramming for exams it did not rate as a high priority! Financial independence is something most human beings strive for yet very little is taught on this subject at schools and universities alike. It is a shame that such critical life skills are rarely addressed in our youth unless our parents are particularly diligent in this area, as many of us have to learn our lessons the hard way.

Whilst at university I observed many of my friends struggling with student credit card repayments. These guys had fallen into the easy trap of spending money they didn’t really have and leaving the worrying for a rainy day. Well guess what? When it rained it poured! One particular friend of mine was spending a lot more on his credit card than he was able to earn each week. I’m sure it was nice buying all those girls those drinks but was it worth the headache of insurmountable credit card interest repayments? This friend still pays to this day for his mistakes as his credit history will not qualify him for anymore credit of any kind. This is quite sad because credit actually can be beneficial to those who manage it appropriately. In fact it could be argued that every human being will need or at least benefit from some type of credit in his or her lifetime. You may know that it is very rare for investors to use their own money in business, instead they leverage the bank’s money to gain profit for themselves before paying the bank back. This an acquired skill and a whole other topic.

So, the question is; should students have their own student credit cards? Despite my rather bleak introduction to this article I would say absolutely yes. I say yes because as I said there are many benefits of having some credit. Also, learning how to manage credit from an early age will set you up to avoid some serious financial headaches in the future. Remember my friend? Trust me, you don’t want to end up like him.

Student credit cards are readily available these days. All major banks will actually have a range of credit cards specifically suited to the needs of the student. Often this might mean reduced rates, student focused benefits, etc. Applying is made very simple by websites like http://www.uscreditcardguide.com where you are able to review the best offers from different banks and also apply online for fast and easy approval. Just remember to have your personal financial information on hand so you can fill out the forms correctly.

There are a few reasons I believe it is important for students to have their own credit cards. Firstly I recommend every student have an ‘advisor’. An advisor can be a professional, a parent or family member, or friend with skills in this area. Most college campuses will offer free financial advice to its students as well. An advisor can help you with budgets, understanding interest rates and help you understand your unique situation. It is important to understand your earning capacity and know whether it will allow for credit card repayments.

It is very beneficial to anyone to establish a credit history which banks use to assess further loan and credit applications. If you wish to own your own home you will have to go through this one day and the longer you can show have adequately maintained a credit card and its payments the better chances you will have.

Financial emergencies, which all of us can relate to, will also come up and a credit card can really make things easier to manage these little crises. Often a low limit of $500 to $1000 is all you need to cover some unexpected expense. It is a great feeling knowing you can handle these situations without having to phone home or borrow from a friend.

Simply using credit cards to pay for things and then transferring money from your savings account to cover the costs on your credit card is a good way of earning benefits from your credit card supplier. These benefits will range from frequent flyer points to shopping credits. Check some really cool student cards including the extremely popular MTV Card.

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