Credit card student
The plight of credit card student debt got a disproportionate amount of media attention but, all at the cost of undercutting the whole point of credit cards significance in a students life.
There is a lamentable lack of interest among parents and schools to instill the values of good money management among kids let alone credit and all this at the cost of jeopardizing his future. Learning the ropes must start early. The transition from adolescence to adulthood is not merely to be measured as a physical shift from school to college; it is also a step forward in life that will bring him closer to reality. Making this leap can be a whole lot complex without a credit history. Post college there is a whole new spate of initiations getting a job, leasing an apartment, buying a car, procuring insurance, managing loans, getting a credit card and host of others all of which need the backing of a strong credit history.
Credit cards for college goers - A prepatory phase into adulthood
College is the ideal time to lay the foundation for a strong credit history. Around this time a college-goer needs to be encouraged to apply for a credit card in his name without parents co-signing for it. This is
the moment when a novice is most likely to be inundated with card offers. The reason behind the credit companies brazen approach is the knowledge of the financial backing that this age-group enjoys from their parents. It assures them against losses and collection hassles as parents are most likely to step in and fill out for a defaulting kid if they fall behind payments or ran up oversized balances. Getting a credit card student post-college is lot more difficult. Offers trickle as lenders realize that graduates are less likely to be bailed out by their parents.
So then, what is the flip side for not starting out early with credit cards Without a credit history the transition from college into the real world can be a whole lot difficult. Getting credit card student at affordable rates could become a distant dream. A credit history that has no evidence of prior use of revolving credit may result in rejection of credit card applications. Insurances, leases, loans and other forms of credit could cost exorbitant and unaffordable. Worst still one may not qualify for them at all.
Setting out on the path of using credit:
The route of the smaller credit cards:
To give oneself a hands-on experience at managing credit it is ideal to get a department store credit card, gas credit card or smaller credit cards. For someone who has just started out to establish credit these cards may appear easier to obtain than the more traditional bank issued credit cards such as the Visa or a MasterCard. Besides these cards have lower credit limits which exercises a restraining influence on over-spending impulses.
Do not overextend yourself with these credit cards. They come packed with high interest rates!
Spending as much as one can afford to pay down every month can save over-piling of credit card balance. Besides maxing out credit cards can tarnish credit reports even before one has set out to have one. Take note of how regularly the account transactions are being reported to the credit bureaus. Having an unreported card account will not boost your credit standing a tad bit.
Building a credit profile with secured credit cards:
With secured cards, a cardholder can make a savings deposit in exchange for a credit line. The interest rates and fees for secured credit cards tend to be lower than those charged on unsecured credit cards as they are targeted for people with poor or no credit. Secured credit cards have annual fees. As the fees and rates vary dramatically from offer to offer it is best to shop around for the best deal. Bankrate.com has a list of "secured card offers" from banks across the country. Before applying for a secured credit card make sure however that the issuer reports account transactions regularly to the bureaus.
With these cards it is wise not to rake up big balances as the interest rates are over-the-top. Stick to smaller purchases that can be paid off every month.
Getting off training wheels with major credit cards:
A good credit rating for a year can set you on the path for major credit cards. You might as well qualify for lower interest rates. Shop carefully so that one may not shortchange you off better deals. Do not overlook offers from credit unions and local banks. Bankrates credit card search engine is also a veritable source for cutting a commendable bargain.
Accumulating a couple of years of on-time credit card payments can put you in good stead as you prepare for a life ahead. Make a conscious effort to build a credit record which continues to reward you in future.
Using cards responsibly:
Once in possession of a new card the temptation is to take it out for a spin. Credit card student do not mean buffer cash in hand to which one is unaccountable but a financial obligation that needs to be paid-off on time. To avoid getting into a glitch with credit cards it is best to charge it for as much amount as one can afford to pay in full each month.
* Do not carry a balance. Some cards charge 20% or more in balance and the rates are likely to change without prior notice even if you have never made a late payment.
* Avoid cash advances. Often they come with an upfront fee of 2 to 4 percent of the amount borrowed and an interest rate which is sky-high. Cash advances do not qualify for a grace period and interest begins to accrue from the moment the money gets drawn from an ATM.
Map out a spending plan. List sources of income - scholarships, loans, earnings from summer jobs and cash from your parents - against expenses, such as tuition, books and groceries. Do not buy goods that are unaffordable for cash-payments. It is a warning bell that signals prodigality. Step back!
* Apply your card only at meeting emergency expenses. Do not use it to pay for living expenses or tuition. Student loans carry a much lower interest rate. Weigh other options as well to determine which is most economical before charging your credit card for tuition and books.
* Make credit card payments on time. Any late payment may compel you to shell an extra $39 each time and an unpredicted hike in interest rate, as high as 30%.
* If the balance is unaffordable to be met in one bulk consider making as much as you can afford. Do not settle for minimum payments every time. This could rake up big credit card debts and an increased volume of interest over the life of the debt ranging between couples of thousands of dollars.
* Avoid carrying too many credit cards. Minimize debt exposure and simplify record-keeping.
Owning and managing credit cards is a matter of grave responsibility. The objective of encouraging credit cards early in ones life is to give an amateur a foretaste in credit utilization. Effective use of this nimble plastic is a sure payback that translates itself into a rewarding credit history right from its rudimentary stages, so that the benefits of it are apparent as one treads on the road to future.
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