Credit Card for Students: some points to consider before having one.

Hi all, welcome back to my blog website. I hope you all are doing great and your hustle is going strong. In today’s blog, we will discuss credit cards for students. We will go through all the advantages and disadvantages of using a credit card and how to use it to benefit from it. Also, I will share the top credit cards for students.

Here are the pointers we will go through one by one in this blog post:

• What is a credit card?
• Why use a credit card?
• Tips on how to use a credit card.
• How not to use a credit card.
• Do you need a credit card if you are a student?
• List of best credit cards for students
• Conclusion

What is a credit card?

To understand how a credit card works, let’s assume that you are a college student working part-time at a stationery shop, earning a monthly salary of 5,000 after you have completed your daily lectures.

Now, assume it’s the 15th day of the month, and you are left with 2,000 as your leftover salary and you see a notification of a crazy price drop of 50% off on the sneakers you always wish you had. Shoes of 8,000 are now 4,000 only, but you are only left with 2,000 in your bank account to spend.

After being rejected by your parents to pay for the shoes, you wonder how you can buy the shoes. That is how you discover student credit cards and find that you can use a credit card by paying the 2,000 by using it. In return, you will repay 2,000 to the credit card company for letting you buy shoes on credit.

As using the card you can make credit payments, therefore it is called as credit card. For letting you make credit payment, the company charges with certain interest rate and you should always monitor your interest payment and these can drain your wallet.

Why use a credit card?

Before owning a credit card, one should have their requirements and motives clarified. So, ask yourself why credit card is used. Credit card exists only to help people spend money on items such as groceries, clothes, fuel, etc. Make note in your mind that the card issuer company wants to make profit out of your spending habits.

Therefore, changing your mindset before owning a credit card will help you with managing your finances. A student should not aim to use their credit card frequently as interest is charged on every use.

Utilizing your credit card in such manner can help in three ways

1. You will develop a habit of spending your money mindfully and saving it.
2.  You will pay less as an interest cost
3.  Not exhausting most of your credit score will help you in building your CIBIL score.

For now, think of your CIBIL score as a measurement of your credibility. In simple terms, if your credit score is good, you are worthy of a loan. Of course, if I don’t think a person who is borrowing cannot pay back, why would I lend money to that person?

CIBIL score reflects your ability to repay your borrowed loan amount. CIBIL score is very important throughout your financial journey, and it’s very important to maintain. Let me know in the comments if you want me to write a separate blog on CIBIL score.

Tips on how to use a credit card.

There are some benefits if you use your credit card smartly, and here are some tips on how to use a credit card to get full benefit from it.

1. The first and most important tip while using a credit card is limiting your spending habit in general and not just by credit card; this habit will help you in the long run.
2. Do not utilize more than 40% of your credit card limit while using it. Building a CIBIL score is very important.
3. Pay your card bill in full before the due date. This will also help in building a credit score.
4. Take advantage of offers and promotions from your credit issuer and utilize the discounts.
5. Understand the reward points and cashback you receive on using your credit.
6. Track your usage, and if you find any unauthorized or suspicious payments, immediately reach out to customer service and get your queries resolved.

Disadvantages of credit cards and steps to avoid

Just like every coin has a flipside, there are some disadvantages too, that can create big impact on your finance. Here are the don’ts while using a credit card.

1. The biggest disadvantage of using a credit card is paying interest which is additional money out of your wallet. It could add more pain to the injury, if you pay late charges. Therefore, avoid missing your payment due dates to avoid additional charges.
2. Similarly, avoid making partial repayments as this will result in increased interest charged and increase your expense.
3. Do not max out your card limit, which will not have a good impact on your CIBIL score.
4. Do not use credit for cash advances. The interest amounts charged on these transactions are huge.
5. As a student, it does not make any sense to have too many credit cards. So, avoid having more than one card because each application does create a good impression on your credit report

Do you need a credit card if you are a student?

Now, let’s discuss if credit cards are good or bad. Personally, I have a very biased opinion on this. My answer is no, as a student, you don’t really need to have a credit.

The reason why I am saying this is based on my college days and the mindset of college students. I used to closely monitor watch prices(I am still a watch enthusiast), and most of my friends also used to monitor t-shirt prices on online platforms.

This kind of habit and easily accessible money (which you do not have in the first place) is a deadly combination to destroy your financial habits even if you start your financial journey in true essence.

However, if you think multiple times before making an expense, you can opt for a credit card and use it sensibly. Do not forget about the rule of utilizing below 30% of your credit limit to build your credit score.

List of credit cards for students

Remember, your decisions decide your future. So, take every decision carefully, be it buying your shoes and accessories or applying for a credit card. If you have decided you want a credit card, I hope you use it mindfully.

Here is a list of credit cards for you as a student:

1. IDFC First WOW Credit Card- One key feature to note about this credit card is that to apply for this card, you don’t need to submit many documents. Also, there are no joining, renewal, or annual fees. As this is an FD-backed credit card, you don’t have to worry about your application being rejected, and you also earn 7.25% on your fixed deposit..
2. ICICI Bank Platinum Chip Credit Card- For this card also, you don’t need to pay Joining and Annual fees. This card rewards points spent on utilities and insurance category payments.
3. SBI Cashback Card: Unlike the cards recommended before, the card charges a joining and Annual fees of Rs 999 along with taxes. You can get this card if you prefer shopping online over offline. Also, this card gives you more cashback instead of reward points.

Conclusion

My friends, to conclude this blog, here are some important points that you cannot afford to miss as a student:

• First of all, instead of looking for the best credit card or how to use a credit card, keep your spending habits limited and spend only when you are comfortable covering an expense.
• Understanding where your spendings go, apply for a credit card that rewards the same expense category.
• If possible, go for a credit card over against FDs, as this will reduce your chances of rejection.
• Don’t go on applying for multiple cards. As being rejected again and again will reduce your CIBIL score.
• Utilize your credit card under 30% of your credit limit to keep on improving your CIBIL score.

Thanks for your time, and I hope this post was helpful for you. Let me know your views, suggestions or anything in the comments section below. Keep hustling and stay strong!