If you are a student or about to become one, then you might be realising that the debt you will incur and the limited opportunity to work whilst studying means you will need to take out a credit card. This can be a recipe for disaster, but if you are careful with the card and pick the right package you can ease your financial troubles through university without getting into massive credit card debt.
The features and benefits
One of the best reasons to get a credit card is that you can spread the cost of your fees and payments over a period of time, leaving you with money to spare. The other advantages of student cards are that they are fairly easy to obtain. If you use your card wisely then you will build up a credit history that will help you to secure loans and mortgages more easily in later life. Student cards usually have very low rates to begin with and also offer discounts on the things students buy most, like books, CDís and clothes.
Why do banks offer these cards?
Banks offer these cards even though they know you have no regular income or means of paying the card back straight away because they are looking to the future. On average, graduates will earn £400,000 more in their life than the average person. Banks and other financial institutions want to get your loyalty so that when you earn money you will remember that they gave you credit, and you will continue to use them for other financial products.
Are there disadvantages?
Of course, there are disadvantages as well. If you do not pay your balance, then you will be charged high levels of interest and quickly create debt for yourself. These rates are often higher than normal cards, and can outweigh the discounts and benefits you get. There is also the danger that you will just spend too much money, and put yourself into debt that will harm your credit rating rather than improve it. You donít want credit card debt as well as student loan debt when you leave university.
What are the alternatives?
If you donít feel that a student card is right for you, then there are some alternatives. If you work part time then you might qualify for a regular card. Although they donít have some of the student benefits, you might get a lower interest rate and a better credit limit than with a student card. Of course, another alternative is to simply budget better and not spend as much money. However, most students find that they can only budget so much and that a card is needed to help them during the difficult financial times when they cannot work, like during exams. If you use your card sensibly then you can save yourself money and not have to worry about running out of money when you have to buy books or pay fees. It will also help to build a good credit history that will help you secure finance in the future when you really need it.
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Peter Kenny is a writer for creditcards-gb.co.uk.
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