10 facts on understanding University Student credit cards

Don't let the stress of schoolwork allow you to overspend. If anything, university life should teach you how to handle your credit card maturely.

Starting university is both an exciting and daunting time for students as they embrace their future. The exciting part can be the commitment to the future and knowing that they will be learning more about a subject that is of great interest to them, but on the flip side is the daunting part about how they are going to manage their finances. A university student credit card can be a very useful tool but it most definitely needs to be managed with care and can be a learning curve in the finance field that will also help you shape your future.

Most young people, including your parents in their day, have a certain amount of struggle ‘leaving the nest’ and fending for themselves. To help you come to terms with your credit spending, have a chat with your parents and see how they handled their finances in their early years and their experiences with credit card use.

10 facts to understand before applying for a University student credit card

1. Debit card – an alternative to a credit card is a debit card. A debit card is linked to your bank account and the funds that are already in the bank account so that you are only spending money that you have and are not running up a credit that if not paid, could affect your credit rating. Debit cards are used in just the same way as credit cards but using your own funds, not the banks funds. Australian university students are finding this a very good system for controlling their spending.
2. Defaulting on a card - First and foremost should be the understanding that when using a credit card it is using money that has to be paid back. If it is not paid back it means that the credit card holder is in default and their credit rating will be affected because of the default.
3. Credit rating – a credit rating is a rating that indicates a person’s ability and responsibility to paying off their credit. A bad credit rating can affect your ability to borrow money for up to 7 years, amongst other things. If through lack of control you abuse your credit card at university it could seriously affect your life immediately after university as you are trying to get established in your chosen career or invest in real estate.
4. Restrict your credit limit – as a credit card is really for emergencies it is a good idea to have a restricted limit on the card. Say $300 – $500 as this is an amount that is manageable on a limited income.
5. Sensible spending – the idea of a credit card for those on a limited budget is to use the credit card in times of dire need. Because a card holder in this situation has limited funds to pay the card back on a monthly basis, the spending on it needs to be strictly controlled. One might think, ‘Oh, I only have to pay the limited amount off the card,’ but the point is that if that is all that is being paid each month and there is also continued spending, then the credit limit will be reached and there will be no more money to spend in times of need. The attitude of only having to ‘pay the limit’ is where credit card users get into trouble.
6. Peer pressure – as a student you will be mixing with others on a limited budget and some may not have a credit card. Be careful not to advertise the fact that you have a credit card so that you do not get pressured to ‘buy another round of drinks’ for your friends. After all, they won’t be paying the card off, will they?
7. Credit card interest rates – there are many different types of university student credit cards on the market and it is advisable not to get ‘sold’ a credit card that will not suit your means. Some cards have very attractive rewards programs but the truth is that if you are not spending amounts like $2000 a month on the card, then you will be paying high fees but have no way of actually accruing enough points to do anything with. Before signing up for a card, look at the yearly fees and at the interest rates on offer. Usually a credit card with low interest is the best for an Australian university student. Make enquiries about ‘student credit cards’.
8. Credit card security – like any banking details, keep your credit card and your PIN number separate. Don’t reveal your PIN to anyone and don’t leave it lying around for others to find. If someone does use your credit card fraudulently, you are still liable.
9. Write a budget – budgeting your spending is the way to go. It is so easy to ‘forget’ when and what you have spent money on if you do not have a budget. This is how credit cards get abused unintentionally and before you know it you won’t even have the money to pay it down.
10. Have a backup plan – if at all possible have a back-up plan for payment of the credit card if you find yourself in a position of not being able to pay even a month’s instalment. This could be because of illness or injury or other factors that may come into play. It may pay parents to have an emergency fund aside in case such a situation arises and the credit card needs to be paid out, or living expenses need to be paid during a time of illness.

Best University Student Card

The CBA Low Fee Card is an ideal credit card for university students to use while they are studying. The low annual fee suits students who don’t need an expensive credit card fee every year. With 55 days interest free students also won’t have to pay any interest on purchases provided they pay on time each month.

• $24 ($0 for qualifying customers) annual fee
• 20.24% p.a. on purchases
• 5.99% p.a. for 5 months on balance transfers
• Cash Advance Rate of 21.74% p.a.
• 55 days interest free
• Low credit limit so students spending doesn’t get out of control

Read the Commonwealth Bank Low Fee Credit Card terms and conditions.

Image source: mortsan

For more informative articles, view our Guide to Student Credit Cards

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