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Five Reasons Students Might Consider Using Credit

Five Reasons Students Might Consider Using Credit

    In North America, students can apply for credit when they attend a post-secondary institution, even without verifiable income. The credit available to them ranges from low limit credit cards to education loans that can reach into the tens of thousands.

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    A person can use this to their advantage, credit decisions made as a student can make a considerable contribution towards the amount of capital and assets they can obtain after graduation.

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    1. You can leverage the benefits of a credit card without succumbing to high interest rates.The high interest rates charged by credit card companies are a result of a multitude of factors, but the greatest factor is the high default rate on these types of products.Be smart when using credit cards, use the interest free grace period after a purchase to enhance cash flow. An individual may not have the funds now, but as long as the balance is paid in full no interest will be charged.In addition, many cards carry a set of free insurances that may include a 90-day replacement warranty for retail items that are stolen, lost or damaged and an additional year of manufactures warranty on certain electronics and appliances.

      Please note that anything considered a cash advance on a credit card will incur interest from the day the transaction occurred. Also, people need to read the credit card disclosure for their particular card before making any purchases.

    2. See a credit card as an opportunity to build a relationship with a financial institutionApplying for a lending product is a chance to discuss future needs and see what other valuable services the company offers.Companies want your business, so remember to ask if they have any special banking offers or discounts for purchasing multiple products.Furthermore, your loyalty to a company can lead to better lending and interest rates when buying a house or planning for retirement.
    3. A long credit history can make you a more appealing credit customer

      Credit worthiness includes many variables, including repayment habits; the number of open credit facilities a person currently has, debt to income ratio and credit history.Even if a person never carries a balance from one month to the next, regular use of a credit card will contribute towards a positive credit score. In particular, lenders like to see credit cards that have been active over an extended period of time and show no late payments.Sadly, as a person gets older the lack of a credit history makes lenders see them as a risk and therefore applying for credit becomes harder once a person is no longer a student.Remember, a secondary user on a credit card gets no credit history benefit because the application is under the primary cardholder’s name.
    4. Using credit facilities can prepare you for a more secure financial future after graduation.At some point, people will consider home and vehicle ownership. A decent credit history will offer more options when it comes to low interest rates and how much debt a credit company will allow someone to carry.Besides financial concerns, having an excellent credit history can affect a person’s ability to get a job or rent an apartment. Employers and landlords are now using credit checks to filter out candidates and unsavory tenants.As the job’s and renter’s market becomes more competitive a great credit rating might give a person a competitive advantage.
    5. The use of credit products develops a sense of independence and responsibilityOptimally, it is wise to have one of three things before applying for a credit card. These include some savings, a job, or parents willing to cover debt expenses.Although, making minimum payments might be convenient, it makes paying off the card almost impossible. Minimum payments in the long run do not make economic sense, but it will keep a credit score clean.Over time, students need to transition financial responsibilities over from their parents. Paying for a credit card might be someone’s first reoccurring bill. It is an opportunity to develop good repayment habits and budgeting skills.

    Although, using credit is not for everyone, applying for credit as a student can be an important milestone. Used wisely, even a student credit card can alleviate many future hurdles involved in asset acquisition and give a person a sense of responsibility before taking full control of their lives.

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    Last Updated on April 3, 2019

    How to Nix Your Credit Card Debt in Less Than 3 Years

    How to Nix Your Credit Card Debt in Less Than 3 Years

    Debt is never a fun thing to be in. But, there are many actions that you can take that will help you rid yourself of the burden of debt once and for all.

    By coming up with a set plan, eliminating your debt can feel much easier than constantly thinking about it.

    This post will provide some tips on how you can do this to help you nix your credit card debt in less than 3 years.

    Hint: there are ways that are easier than you think.

    1. Consider Consolidating Multiple Credit Cards If Possible

    This may not be applicable to you, but if you have multiple cards – it is something to consider. Keeping up with multiple bills is time consuming.

    It will depend on the balance you have on each. Consolidate ones you can but do not do it to the point that you get too close to the maximum limit. Also, it is ideal to pick the card with the lower interest rate.

    Consider if there are any fees or alternatively, rewards, with transferring a balance to another card. Watch out for fees. Note that some cards offer rewards for transferring a balance to them. This is extra cash that can help go towards paying off your debt.

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    Having one or two cards can make nixing your debt much simpler than keeping up with the balance of a bunch of cards. Keeping track of paying the minimum towards a bunch of cards is time consuming. Spend the time to consolidate instead to make the overall process simpler going forward.

    My tip: Have one main credit card. Have a second one that you use for necessities – such as groceries or gas – that offers rewards for those purchases (a lot of cards do) and set the second one on auto-pay. You should be able to pay off a smaller amount on auto-pay if it is a necessity. If you think you cannot, then you may need to cut down a lot on expenses.

    Why do I suggest doing this? Having one thing set to auto-pay is one less thing to think about. One less thing to waste time on. Same idea with consolidating to one main card. Tracking down too many is a hassle.

    2. Try to Pay the Full Balance You Spent Each Month at the Very Least

    You need to pay off the amount you are spending each month when that bill comes in. This is the amount you spent THAT month.

    Do not let the debt keep accruing while you work on paying any unpaid debt that has accrued. It will become a never-ending battle. Try as best as you can to be current on paying for each month’s expenses when that month’s bill comes out.

    If this is a strain, consider why. You may need to cut expenses. Or you may need to consider other cards. Or look at where this money is going.

    3. Pay Extra When You Can – Every Small Amount Counts

    This cannot be emphasized enough. If you are looking at a lot of credit card debt, it can look daunting, but each extra amount that you can put towards the debt will really add up – no matter how small it is.

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    It does not just reduce the principal amount that you have left to pay off, but it reduces the amount that is collecting interest. You will always save money with that reduced interest.

    4. Create a Plan on How to Pay Extra

    Back to the main point, having this plan is giving you one less thing to think about.

    This plan should be a plan that works for you. If it does not work for you, your spending habits, and your views on debt, then it will not be an effective plan.

    For instance, if a set plan of an extra $50 (or another amount that you know you can afford) works for you, then do that. Set that aside every month and pay that extra amount. Treat it like a bill. Choose an amount that works for you and pay it like clockwork as though it was a bill you had to pay each month.

    Little amounts will not nix it entirely, but they will help tackle it and having a set plan can make it less of a chore. Creating a new plan of how much to put towards it each month is an unnecessary added stress.

    5. Cut out Costs for Services You Do Not Use

    If you are signed up for subscriptions that you do not use because of some free trial or for some other reason, cut it out. Your overall financial position will look better.

    In turn, that will make cutting your credit card debt easier. Look at your statements to find these expenses. If you do not use them, you may forget you are paying some unnecessary amount each month. Cutting it out can really add up in savings that you can put towards other needed expenses.

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    6. Get Aggressive About It

    Consider these points:

    Depending on the interest and the level of debt, you may need to give up a few indulgences. For example, instead of ordering delivery or going out to eat, cook at home. Everything adds up.

    Other things may be more of a sacrifice. It may be a trip you wanted to go on, or a daily latte habit you’ve picked up. In these instances, consider how important it is to you and if it’s worth the sacrifice. And if it is a costly expense, think whether you can wait to indulge.

    Cutting an extravagant expense can really help make a dent in your overall debt. Try not to add to debt when you are trying to pay it off. It will be a never-ending battle. Make it less of a battle with these tips and it will feel easier.

    Bottom line: Do what you can to make this process easier for you. Implement steps that do this. It takes time now, but will help overall. Also, keep track of your spending and paying down of your debts. Which is the next point.

    7. Reevaluate Your Progress at Set Intervals

    Doing a regular check-in can help you see your efforts pay off or maybe indicate that you need to give this a bit more effort. If you check every 3-6 months, it will not feel so much like a chore or feel so daunting.

    By doing this, you will be able to better understand your progress and perhaps readjust your plan. Bonus: if you see it pay off, it will feel great to do this check-in. You will get there.

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    Finally (and most importantly)…

    8. Keep Trying

    Do not get discouraged. Pushing it off will make it worse. Just keep trying.

    Once your debt becomes lower, each monthly payment will reduce the balance more. Why? You are paying less towards interest. It will be a snowball effect eventually and it will become much easier to manage. Just get to that point. And know once you do, it will feel easier and motivating.

    Start Knocking out Your Debt Today

    The best way to eliminate debt is to get started right away. Begin by implementing the above steps and watch your debt just melt away. Try out some of the above strategies and see what works best for you. Soon you’ll be on your way to a debt free life.

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    Featured photo credit: Pexels via pexels.com

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