After years of buying rounds for friends, dinners for dates, and the newest gadgets, you graduate with loads of debt and no plan for repayment.
On the other hand, there’s an equally cautionary tale: the student who foregoes all credit offers and graduates without establishing a credit history. Frugal Fiona is just as bad as Spendy Sam. Believe it or not, having a credit card throughout your time at uni is actually a responsible way to secure your financial future — provided you use it responsibly and pay off your debt regularly.
Still worried? Don’t be – this is how it works: the earlier you build a credit score, the sooner you can apply for car loans and other loans. Most students typically get a credit card during their first year at uni, which can ensure that they’ll have a good credit score to qualify for a mortgage once they accept a job after graduating.
Likewise, a credit card gives you the resources to purchase books and supplies in advance of expected income. Handy if you need to buy books but haven’t started your part-time job or received your first salary, your credit card can help cover the gap.
This, however, brings up an important point. Constantly using your credit card as ’emergency spending money’, especially for all of those emergency pizzas that you somehow end up scoffing, can set you up for disaster. You need to plan your credit card spending just like you plan your course schedule. If you don’t expect to have a lot of income in January but know you’ll start earning money again in the spring, you had better be ready to pay off your credit card come March.
A credit card can be your first taste of financial independence; unfortunately, this freedom is too great for some to handle. It’s scarily easy to get into financial trouble. You may end up shopping uncontrollably and racking up high balances – and it goes without saying that you must never, ever lend the cards to friends who are short of a few bob.
According to this infographic, around 95% of the minimum monthly payment will be interest. That means that only a small percentage of the balance will be paid off each month. But fortunately, there are ways to use credit cards responsibly and receive debt help if necessary. Here’s how…
1. Only buy what you can afford. Because getting a credit card in uni is an excellent way to build a credit score early, you need to exercise self-control and only use the credit card if you expect to quickly earn the money to afford the purchase.
2. Pay off balances in full. In addition to only buying items that you can afford, you should develop a habit of paying off your credit cards in full every month. This keeps your balances low and helps reduce how much you pay in interest. This can be tricky — after all, if you had enough money in your bank account, you wouldn’t need the credit card, right? Just remember: even if you can’t pay off your card in full every month, money you earn in the future has to go towards paying off your debts first.
3. Get professional help, if necessary. For young adults who already have too much debt, they may be able to settle credit card debt and enjoy a fresh start. Debt settlement is a provision that lets debtors settle their balances for less than they owe – typically a percentage of the outstanding balance. This allows you to wipe the slate clean and make better financial decisions going forward.
4. Don’t carry the card around. To avoid debt trouble, you should avoid carrying credit cards in your wallet. Instead, you should leave the card locked or stored in a safe place inside your halls or room. With the credit card at home, you are guaranteed not to use it on pints at the pub or any other impulse purchase.
Image credit: Thinkstock
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A credit card can be your first taste of financial independence; unfortunately, this freedom is too great for some to handle. It’s scarily easy to get into financial trouble. You may end up shopping uncontrollably and racking up high balances – and it goes without saying that you must never, ever lend the cards to friends who are short of a few bob.
According to this infographic, around 95% of the minimum monthly payment will be interest. That means that only a small percentage of the balance will be paid off each month. But fortunately, there are ways to use credit cards responsibly and receive debt help if necessary. Here’s how…
1. Only buy what you can afford. Because getting a credit card in uni is an excellent way to build a credit score early, you need to exercise self-control and only use the credit card if you expect to quickly earn the money to afford the purchase.
2. Pay off balances in full. In addition to only buying items that you can afford, you should develop a habit of paying off your credit cards in full every month. This keeps your balances low and helps reduce how much you pay in interest. This can be tricky — after all, if you had enough money in your bank account, you wouldn’t need the credit card, right? Just remember: even if you can’t pay off your card in full every month, money you earn in the future has to go towards paying off your debts first.
3. Get professional help, if necessary. For young adults who already have too much debt, they may be able to settle credit card debt and enjoy a fresh start. Debt settlement is a provision that lets debtors settle their balances for less than they owe – typically a percentage of the outstanding balance. This allows you to wipe the slate clean and make better financial decisions going forward.
4. Don’t carry the card around. To avoid debt trouble, you should avoid carrying credit cards in your wallet. Instead, you should leave the card locked or stored in a safe place inside your halls or room. With the credit card at home, you are guaranteed not to use it on pints at the pub or any other impulse purchase.
Image credit: Thinkstock
