Things college students must know about credit cards

Credit cards
The age at which students start going to college is extremely crucial. This is the time when you start taking most of the decisions all by yourself. You love experimenting and trying out new things to understand what’s best for you. May it be buying a new phone or choosing a credit card to buy that phone – it is always good to indulge in a good amount of research before picking anything.

Students are generally new to the entire credit card world at this time. It is highly possible for you to make a wrong choice unless substantial research is done. When it comes to financial decisions, it is good to not learn it the hard way. Talk to your parents to understand things that any college student must know about credit cards. There are so many things that must be kept in mind while going for a student credit card – interest rates, credit debt, fees, etc.

Let us talk about some of the most important things that you must keep in mind before getting a credit card.

Read the Fine Print

The credit card terms and conditions are subject to change as per the issuer’s decision. Thus, it is highly necessary for you to know all the terms set by the card issuer. The fine print of the card may have hidden fees and charges you might incur after taking the card. Many banks will not tell you about such fees because they want to sell their credit card. Hence, it is advisable to read the terms and conditions before owning a card.

Attractive Offers

In order to attract new customers, some credit card issuers offer great welcome gifts like cashback on online applications or goodies. You might fall prey to such tempting offers and opt for the card. You need to understand that with the great power of a credit card, comes great responsibilities!

If you are taking a credit card, chances are that you might go all out and buy expensive items. But remember, you have to take responsibility for your spendings and pay the bills on time.

Fees and Charges

Understanding what the annual fee associated with the card is probably of utmost importance. You should also check the interest rate charged on the card. Low interest rate credit cards are ideal for students like you. Any credit card comes at a price. Lower the cost associated with the card, better it is for you.

Penalty costs such as late payment fees and over-limit fees are a couple of things that you must take into consideration while choosing a card.

The over-limit fee stops most credit card users from going overboard with their expenses. As a student, you must always control your expenses, more so when using a card. For example, a product that costs S$20 might be charged almost twice the amount if the over-limit fee is levied.

Try to Avoid Making Only the Minimum Payment

Youngsters using credit cards for the first time must realise the fact that if they pay a debt of S$300 over a long time by clearing only the minimum due only over months, they might end up paying a lot more to the credit card company as interest. This is because interest on unpaid balances will be charged at a compounding rate. Also, paying the minimum balance is not a good habit. It is ideal to learn clearing outstanding debts in full at a young age. This teaches better finance management and avoids unnecessary interest payments. Making full payments on your statement balances also helps improve your credit score.

Avoid Cash Advance

In case you run out of cash, cash advance should never be your first option as they charge excessively high rates of interest that starts accruing immediately along with being charged a cash advance fee. The immediate cash might solve the problem temporarily but it will only make the repayments heavier and tougher.

It is a great idea to build good credit at a very young age. A good credit history helps to get better loan offers in the long run. If you use credit cards wisely at this age, you will increase your creditworthiness by many folds. Banks always trust people with a good credit score because it reduces the risk of default for them.

If a credit card is not used carefully, it may become a liability for you. Fees will keep stacking up and payments will become harder to keep up with. Your credit score will also take a big hit and it will be difficult for you to enjoy good offers on credit lines in the long run.

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