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Student credit cards are an important tool for students who are about start their lives in the university. Wise use of these cards can make their lives away from home a lot easier. They can focus on their studies without too much financial burden on their minds. However, mismanagement and improper use of these cards can lead to the opposite. CLICK HERE To See Our Student Card Offers Following are 10 facts that young people must understand before applying for student credit cards. Understanding these things may help them avoid getting into financial binds in the future. 1. Debit card - This is an alternative to a credit card and is associated with your bank account. Used similar to a credit card, the difference is that you do not incur a debt when you use a debit card. Purchases are charged in real time to your bank account. Spending limit is the available balance in your account. Students can learn funds management this way. 2. Payment default - Unlike using a debit card, purchases using student credit cards must be paid. Failure to do so on time will result to payment default. Penalties will be imposed and the cardholder's credit standing is adversely affected. 3. Credit rating - This refers to a person's paying performance and capability. A good rating results from prompt payments with no delays. A bad credit may result to difficulty in borrowing funds or obtaining loans in the future. This is why young Americans are best advised not to default on payments on their student credit cards to avoid getting a bad credit rating. 4. Responsible spending - Wise use of the card is very important. It must never be used indiscriminately and for items that are not really necessary. Limit your spending to what you can actually pay for when card payment becomes due. Irresponsible use of credit cards is often the cause of payment defaults. 5. Restricted credit limit - Since student credit cards must only be used for essentials and emergencies, spending limit is best limited to a manageable amount to avoid overspending. This is ideal for those with very limited income. 6. Peer pressure - Some students have more money than others. Do not try to keep up your spending with those who have enough to splurge. Limit your spending within your means. 7. Interest on credit cards - Credit cards designed for students usually offer lower interest rates. However, whether interest rates are high or low, the same principles apply. They add up to the unpaid balance and will eat up on your purchasing limit. Avoid accumulating interest by paying the total outstanding amount on your account statement. 8. Credit card security - Just like a bank ATM, never divulge details of your credit card to anyone to avoid unauthorized and fraudulent use. Keep your PIN and card numbers to yourself unless you need to use them for secure payments. 9. Learn to budget - Make a budget for all your spending and stick to it. Never spend for something you do not have a budget for. 10. Prepare a backup plan - Be sure you have a provision for funds that you can easily get in case of emergencies. For example, if you cannot make payments for your student credit cards on time, you must have an alternative source of funds to pay for them.
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