Nine Reasons why credit cards are beneficial for students


The student of today is the citizen of tomorrow. If you want the citizen to become responsible in his/her financial matters, it is better to start early and ensure to teach fiscal discipline to students. Students grasp things faster than their older counterparts do. Therefore, it is easy to explain a new concept to students and change the way they look at financial matters. Introducing the idea of student credit cards is the right step in this direction. We shall now explore nine reasons why credit cards are beneficial to students.

Makes you financially responsible

Maintaining fiscal discipline is an essential aspect of life. A financially responsible person can attain success in life. The right time to learn the elements of financial control is when you are young, especially a student. It is one thing to learn the theoretical aspects of fiscal restraint from your textbooks and curriculum. Learning it the practical way ensures that you absorb the critical concepts of financial discipline.

Having a credit card and using it wisely is the best way to learn fiscal discipline. It is better to learn how to use a credit card when you are a student. Paying the credit card bills in full and on time every month is an integral aspect of learning the usage of credit cards. When you develop this habit early in life, it tends to remain with you throughout, thereby making you a financially responsible person.

Timely Repayment - Makes you disciplined

Every credit card has a time limit within which you have to clear your dues. This mandate of on-time payment makes you disciplines in life with respect to managing your liabilities. The control that you learn at this stage in life will remain with you forever. It will end up improving your financial position because you not only learn to spend within your limits but also save a lot of money by way of interest payment.

Interest/Penalty - Teaches you to manage your finances properly

If you fail to pay the entire credit card bill before the due date, you end up paying massive amounts as interest. The rate of interest can go up to more than 36% per annum. Failure to manage your finances properly leads to the imposition of financial punishment or penalty in the form of substantial interest on the outstanding amount. Hence, you should clear your dues on time to avoid incurring interest penalty.

Credit Limit - Teaches you to manage with limited resources

Every credit card comes with a credit cap over which you cannot spend. Student credit cards usually come with low credit limits. This limit teaches you how to manage your credit needs within your capacity. If you manage your credit card payments regularly, you can request your credit card issuer for a higher limit in the future.    

Helps build your credit history

The student of this generation is different from the earlier ones. Today, a student steps into the world with the burden of repaying an education loan. Thus, we can state that he/she begins their lives with a handicap that the earlier generation was fortunate enough not to.

You have to build your credit history the hard way. Having a credit card (even a secured credit card should suffice) can help you develop the habit of repayment. As you build up your repayment history, you strengthen your credit rating. By the time you start earning and start the repayment of your education loan, your credit history has a healthy appearance. It can help the student in getting new loans such as home loans, car loans, or even personal loans. Otherwise, it takes time for the student to improve their credit score.

Student credit cards are the best ways to build up an excellent reputation for repayment. If you do not have a student credit card, you can have an add-on card from your parents' account. However, most of the credit card issuers and banks have exclusive student credit card products. These cards come with specific features and low credit limits. The primary objective behind these credit cards is to bring in the element of financial responsibility in a student.  

Become financially independent

When you have a credit card in your name, you become economically independent. You are free to use the credit card to buy whatever you want. However, it is better to remember that you have to pay the credit card bill before the due date. Therefore, it is not advisable to incur debts that you find difficult to pay. It does not take time for the interest component to add up and reach dangerous levels.

Using your credit card is beneficial to you in many ways. You do not have to depend on your parents or friends to lend you money. You can decide whether to buy a particular item or not. A financially responsible student will ensure that he/she does not incur expenses that they cannot repay on the due date. Thus, fiscal responsibility also brings in the sense of financial independence.   

The convenience of making payments

Using credit cards is the most convenient method of making payments today. You can buy almost anything online. Under such circumstances, credit cards have become more of a necessity than a luxury. Students are online virtually throughout the day and night as well. Hence, they form the maximum proportion of the population that buys products and services online. Student credit cards add to the convenience of making payments.

In many ways, credit cards are better than debit cards for online payments. For example, renting a car using your credit card is more comfortable as compared to a debit card. The service provider does not debit the account but earmarks a portion of your credit limits. You have time to make the payment.  

Get rewards and cash back offers

Student credit cards come with attractive bonuses, and discount offers that you can take advantage of any time. Various retailers and departmental stores also offer cash back and rebates on purchasing their goods using your credit cards. Students can use this cash back and rewards for activities such as dining at a restaurant or watching their favorite movie, and so on.

These are promotional offers directed to benefit the student community. Using a credit card is the only way you get these benefits. When such benefits are available to students, it makes sense to take advantage of them. These rewards can also help to develop fiscal discipline because credit card issuers and banks offer such bonuses only to students who are prompt in their repayment.

The benefit of warranties and insurance

The most significant advantage of using credit cards over debit cards for making online purchases is that you get better protection when using credit cards. You also get a higher level of protection against unauthorized debits on your credit card account as compared to your debit cards. The banks offer a higher level of protection to credit card purchases because they have to recover the amount from you. 

Credit cards come with personal accident insurance coverage. Typically, such coverage is not available on debit cards. It is one of the lesser knowns, but a significant benefit of using credit cards.

Important points to remember

  • It is better to make it a habit to pay the credit card bill amount in full every month. The ideal way to go about is to issue an auto debit instruction to the bank for the total amount of the credit card balance. In this way, you never miss a payment.
  • It is better not to use the cash advance facility that comes with every card unless it is an emergency. Cash advance amounts do not have any interest-free periods. Besides, you have to pay a cash advance fee for every transaction.

Final words

Possessing a student credit card is not a big deal. Using it wisely to the best of your advantage is undoubtedly one. As you now know the benefits of using student credit cards, your objective should be to become financially responsible. It can help you build a good credit reputation that can stand you in good stead in the future.

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Guest 
on 11 June 2019
Published in Students
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