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.
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.
- 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.
- 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.
- 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.
- 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.
- 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.