Tap to Read ➤

Credit Card Guide for College Students

Swapnil Srivastava Feb 15, 2019
Credit cards offer an opportunity to college students, to avail the facilities of credit, as well as to learn managing personal finances well.
Credit cards are a good option for high school and college students, which helps them carry out numerous basic transactions like hotel and airline reservations, shopping on the Internet, etc. Nowadays, most parents want their children to have a credit card, which would help them in case of an emergency.
Despite all the criticism, it provides an opportunity for students to learn more about credit scores and their importance. However, before applying, one should be sure of his abilities to repay the debt every month. Parents are required to assist their child while co-signing for a credit card and they should make sure that it is used properly.
It has various benefits like non-requirement of income, lost wallet services, credit education tools. The most important benefit is that banks are lenient with young people with limited loan histories. Also, there are rewards and perks for student lifestyles, and also benefits like 0% introductory interest rates, rewards, and cashback are also offered.
If one has to earn rewards, he should read the terms and conditions, as the cards have high interest rates. The student with a credit card may be eligible for rewards, if he pays off their debt timely. One can look for a scheme with cashback rewards or inquire with the bank about the reward schemes. Here are few points to remember.

Understand the Credit Scores

Credit score is a record of one's credibility and depends on how punctually he pays back the borrowed money. It is stored at a credit bureau and improves if one makes timely payments. Events such as late payments, incomplete or partial payments, and defaults, affect the scores negatively.
This score depends around 35% on one's payment history, 30% on his outstanding debt, 15% on the length of his loan history, 10% on the recent inquiries on credit report, and 10% on the types of credit in use.

Look out for a Card with Low APR and Interest Rate

APR or the annual percentage rate describes the annualized rate of interest, rather than just a monthly fee or rate, as applied on a loan, credit card, etc. Before deciding on a credit card, students should always check out the APR imposed on its usage. It is advisable to get one with low APR, in order to avoid deferrals.

Spend Prudently

Once the formalities are completed and the card is received by the student, he is often tempted to spend more than what he can afford to pay the next month. Such temptations should be avoided and the money should be spent prudently so that the history and scores are not ruined.
Good scores and reports are important for financial freedom in modern world, and to apply for loans in future. They help in major purchase from cars to houses. Student credit is often misunderstood aspect of personal finance, but is the first step for one's credit history and to get the habit of paying bills each month and earning free gifts through offers.
Disclaimer: This information is for reference purposes only and does not directly recommend any specific financial course of action.