Should you Use Credit Cards for University?
In the golden age of credit, before the recession, hundreds of students every year were living the high life at university by creating vast networks of credit cards and then maxing them all out. At the end of their courses these, somewhat clever, students would then simply declare themselves bankrupt; thereby writing off usually all of their debts in one fell swoop. Credit was so plentiful that the black marks acrrued would only last for a few years; meaning long term credit ratings were barely effected. This technique for avoiding university debts became so popular that, as a result, laws had to quickly be changed to deal with student loans and debts accrued by students. At the same time the recession drove the price of credit through the roof and it was much harder for students to get extensive lines of credit.
While we don’t recommend the above strategy the reality is that many students now accrue significant debts through credit cards during their university education. Student loans are still relatively low while university fees continue to skyrocket, so it’s understandable that more students are having to fall back on credit cards to cover their expenses and their living costs. Here we take a look at supplementing your income with credit cards at university, the alternatives and the pitfalls.
So Should You Use Credit Cards at University?
The short answer is simply no. Using credit cards effectively means that you need to have the money to pay them back as quickly as possible – before any interest actually accrues. This can be incredibly difficult if you are relying on a student loan to meet your credit debts. It can be very easy to find your debts increasing exponentially. If you are going to use credit cards then you have to really make sure of three things
- That you manage your finances properly
Few students bother budgeting and, as a result, they often find themselves without money. If you’re going to have a credit card as a student you want it to be as a last resort. You want to budget properly for your terms and make sure you stick to your budgets. This seems obvious but if you overlook it you will run into problems. At the same time you want to make sure that you are managing your credit card and your interest rates while at university – so that your debt doesn’t begin to spiral out of control.
- That you understand the interest rates
Credit cards are not free and you will end up paying interest on any money that you cannot repay promptly. Before applying for or using credit make sure that you fully understand your monthly interest rate, fees on balance transfers and payments, minimum monthly repayments and any standing fees that might apply. Shop around for the best deal before applying for a credit card.
- That you pay back promptly
If you let your debt pile up it will come back to bight you. So before you start thinking of using a credit card make sure that you will have the money to pay it back. Whether you know you can repay it when your next pay check comes in or when your next student loan payment is made. If you manage your money carefully you can use credit cards whilst avoiding debt.
But What are the Alternatives?
For many students, using credit cards has become a necessity as we struggle to make ends meet during our studies. You don’t want to get a full time job as you need to study. However, there are alternatives to credit cards that are worth looking into. Firstly, part time work is the backbone of keeping afloat at university and Student Union Job Shops are usually full of part time work offers that can net you a little extra income. Alternatively you can look into funding options available from your university itself. Many universities offer a range of grants and bursaries to help those struggling financially. A lot of these grants are means tested so you will have to provide proof of family income and your own assets. As a final thought also consider trying to get your student overdraft extended before resorting to using credit cards as many banks will extend your interest free overdraft each yeah or if you ask them too. Just bear in mind that when you finish university you will have to start paying interest on this loan!