Credit card use by students - things to keep in mind

    Getting your first credit card can be very exciting and for some of us, quite scary too. Having a credit card means finally stepping into the adult world and accepting responsibility. Getting a credit card while you are still in college is a very smart move. Not only does a credit card act as a tool for cashless transactions but it also acts as a credit building tool. Managing a credit card well will not only help you start building a credit history but it will also help you build a good credit score. But it is very easy to mistakes with your first credit card, especially when you are a college student. It is very important to know how to use your credit card in order to ensure you don’t misuse it and land yourself in trouble. In this article we will be discussing the “Do’s and Don’ts” of a credit card that every student should follow.

    Do’s and don’ts of a credit card for students

    When it comes to credit cards, there are certainly more Don’ts than Do’s. But in order to manage a credit card successfully, one has to not only avoid mistakes but they should take certain precautions so as to they do not commit any mistake in the first place. Let’s discuss some of the things that a credit card holder should do or not do when it comes to credit cards.

    • Choose the right credit card- The first step in ensuring that you manage your credit card well is by choosing the right credit card. There is no dearth of options for Singaporean students when it comes to credit cards in the market. Most of the banks offer credit cards designed specifically for students. But each credit card is different, they have different rate of interest, different benefits, different privileges and so on. Hence, it is very important to analyse each option and choose a credit card that best suits your needs.
    • Understand the terms- Once you have decided on a credit card, the next step is to study the terms and conditions attached to the card chosen.  We are not talking about the rate of interest on the card or the benefits of the card. We are talking about factors that will affect your life with the credit card later. Not many might pay heed to factors like APR, Annual fee, additional fee, etc while purchasing a credit card. APR or annual percentage rate is the rate of interest the card holder will be charged with for carrying a month to month balance on their credit card. It is important to check if your bank has a low APR or a 0% APR on your card. A high APR will only lead to you paying a heavy price when you do not make minimum payment on the card. Another factor to consider is the annual fee of the card, while most of the banks offer waiver of annual fee for the first year or two on their credit cards, there are many credit cards that come with a high annual fee. It is important to find out these factors to determine if you are capable of handling the credit card chosen.
    • Start with one card - It can be very tempting to apply for more than one credit card. But if you are a student who just got their first credit card, we suggest that you stay away from getting another one for a while. It is very important to learn to handle your credit card before you apply for another one. Too many unnecessary credit cards might not only land you in debt but it might also bring down your credit score dramatically.
    • Do make payment on time- It is very important to make payments on time when it comes to your credit card. A major chunk in your credit score depends on your ability to make payment on time on your credit card and not making payments on time will not only attract additional charges but will also ruin your credit score. It is imperative to make payments before the due date every month.
    • Borrow what you can pay back- Having a plastic card that gives you access to cash that you don’t have can be quite thrilling! But just because you have a credit card does not necessarily mean that you go about using our credit card everywhere on everything. It can be tempting to swipe your credit card everywhere but it is important to resist that temptation. Ensure you only charge for what you can pay back on your credit card. Making a purchase you cannot really afford later is a very bad credit card move.
    • Stay far from the credit limit- Yes, every credit card comes with a credit limit. A credit limit is the maximum amount that the bank has agreed to lend you. The credit bureaus require the credit card holder to using less than 30% of their available credit limit. Getting too close to your credit limit will harm your credit score. The cardholder should control their spending and pay the credit card balances in full to ensure they stay within the 30% limit.
    • Protect the card-Last but not the least, protect your card. It is very important that you keep your card safe and do not lose it. It is advisable to not share your credit card details with anyone as there are chances that the details might fall into the wrong hands and land you in trouble. In case you lose your credit card or misplace it, it is important to contact the bank and let them know of the situation immediately or else you will be held liable for the transactions made on the card.

    Handling a credit card can be quite scary, especially when you are a student who hasn’t seen much of the finance world. Following the above mentioned steps will not only help you start your credit card journey with a bang but will also help you build a good credit score and credit history for the future.

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