Embarking on tertiary study is an exciting time. In fact, while it may not seem like it now, you’ll look back on your student years as some of the best times of your life. Sure, there’s hard work and lots of reading, writing, and cramming to do – but hopefully, there are some parties and fun along the way. So you should soak up the good times while focusing on learning and attaining your degree with flying colors.
However, there are specific financial responsibilities and limitations that accompany being a student. And being a student doesn’t mean you won’t have living expenses alongside school expenses. Because of this, many students work casually or part-time to pay the bills while studying.
It can also make sense to use a credit card while going to school to allow flexibility in your spending and improve your financial independence. But how do you choose the right credit card to suit your spending and saving habits? We’ll answer this question today, so read on to learn how tertiary students can select a suitable credit card for their unique consumer needs.
Consider a Rewards Credit Card
First, you’ll want to identify the best rewards credit card available. These premium credit cards offer you bonus rewards points for your spending. Some rewards cards even offer airline points that can be redeemed for flights and travel. Other credit cards offer reward points that can be spent on goods online, redeemed for cash back, or put towards gift cards with a selection of retailers.
A rewards credit card is a good option for students who are looking to get more value with every dollar that they spend. You can reap the rewards points if you pay your balance in full every month. For instance, students could get into the habit of paying for everything using their rewards card – groceries, bills, online shopping, and on nights out with friends. Each dollar you spend will net you a reward point, and sometimes, the banks will put on special offers, such as triple points, for certain purchases. You can take advantage of these offers and be rewarded simply for making purchases throughout your everyday life.
As a reminder, it only makes sense to use a credit card for their rewards if you can pay off your balance in full each month. That way, you won’t be charged interest on your purchases, and accruing interest on your credit card balance is a surefire way of diminishing your savings ability – especially as a student when you already have a limited employment capacity.
Grow Your Credit Rating
Getting a credit card is an excellent way to grow your credit rating or score. Your credit rating/score is a number calculated by credit measurement and recording bodies. These bodies effectively assess your worthiness for credit and your likelihood of being able to afford loans or credit cards in the future based on your repayment and spending habits.
Usually, when you’re a student, you’ll have a low or non-existent credit rating. Sometimes, a cell phone plan can contribute to your credit rating, as will utility bills such as gas or electricity. By getting a credit card and demonstrating that you can pay these bills off in full each month, you will slowly but surely improve your credit rating. This will serve you well later in life when it comes time to apply for personal finance for a car or even when you’re considering taking out a home loan.
By taking out a credit card as a tertiary student, you can begin building a solid credit history and bolstering your creditworthiness right now.
Consider a Low-Interest Rate Credit Card
There are a range of different credit cards on the market. The top-end ones offer various benefits, such as insurance, purchase protection, and other practical perks. However, they often have high interest rates of around 19-20% to offset these benefits. That way, your loan providers can still make a comfortable profit.
However, all banks and loan providers want to provide credit products to suit different types of customers. This means that for every top-end card, there’s another credit card with a lower interest rate that offers fewer perks. These cards tend to have interest rates in the low teens, ranging from 12-15%. This means you’ll pay less interest on your purchases when compared to a premium card. More often than not, these are the cards that young people like students go for, as they’re significantly lower risk. If you fail to pay off your balance, you’ll incur interest charges, but they won’t be as high as if you had a premium card.
Simply put, if you’re looking for a credit card that won’t be likely to add to your debt during your tertiary study, then these low-interest cards are likely to be a good fit for you.
Consider a No or Low Fee Card
Most credit cards come with fees – once again, it’s a way for banks and loan providers to profit from their credit products. On top of interest charges, credit card fees include international transaction fees, cash advance fees, and monthly or annual fees for keeping that credit card every year. This all adds up if you’re a student with a lower earning potential.
However, some banks offer no or low-fee cards, which is an excellent option to consider when studying. But banks and loan providers know just how valuable these no and low-card fees can be. That’s why it’s common to see these cards bundled with another banking product, such as a transaction account. Finding a low or no-fee credit card is a good option when studying, however. Just be sure you know exactly what that low or no-fee credit card will be bundled with.
Set a Reasonable Credit Limit
Finally, when applying for a credit card, you must set a reasonable limit you know you can afford. As a student, a credit limit of between $500-2000 per month should be a good amount. This allows you to pay your rent, groceries, and utility bills with your credit card, allowing you to earn rewards points on all these large transactions.
Remember to consider all your credit spending as using your own money – not your lender’s money. Never spend over your means, and always remember to pay off your balance with every credit statement. If you set a higher limit, you risk overextending yourself and winding up with credit card debt that may be difficult to clear while studying. Contrastingly, getting into the habit of spending within a clearly defined limit is a truly valuable life skill that’s best honed early. In short, this is an excellent practice to get into – building healthy, responsible financial habits.
A Credit Card Conclusion
This helpful article has shared the student’s guide to selecting a credit card. Now that you’re fully informed, you can decide the best credit card for your needs.
Be sure to do plenty of independent research and ask questions when communicating with all your shortlisted loan providers. That way, you can make a well-informed decision when selecting a credit card to support your student spending habits.