In a world where it seems that everything from household groceries to cars and homes are bought through a card, it is essential that everyone learns to handle a credit card responsibly. This can partially be achieved by placing some burden of debt on university students through the use of credit cards and/or student loans. The ability to use credit sensibly, instead of on frivolous items, trains the younger generation for the future when they step into the real world.
Student Credit Cards
Having a student credit card is a good way to help deal with unexpected expenses and as well as fun opportunities to do fun stuff. Where credits cards offer many conveniences, they also carry a responsibility and must be used with care.
Benefits
Besides the obvious benefits of early training in managing debt and starting a credit history on a good footing, the additional benefits of credit cards include:
- Security of not having to carry cash
- Extra benefits like bonus / reward programs
- Ability to buy cheaper books and school supplies online (but you can use a VISA/MasterCard debit card if you want)
- Lower income requirements for students, as they usually do not have full time jobs
- Lower limits to help avoid accumulating too much debt
Drawbacks
The use of credit cards requires discipline as falling behind with payments can lead to debt problems and serious damage of the credit rating. A poor credit rating can hinder the chances of acquiring financial stability after the studies have been completed. Other limitations and drawbacks of credit cards include:
- You need to be enrolled in a full-time accredited institution to be eligible
- May requires a co-signer (parent or guardian) in order to get a credit card
- Most student credit cards carry fairly high interest rates, as there is no previous history banks are taking a greater risk by lending money to students
- Sometimes banks have other requirements that need to be fulfilled in order to be able to get a card, like opening of a savings account
Student Loans
Students in Australia looking to complete university studies will all know about HEC’s to pay for tuition. Beyond that its up to the student and/or their family to come up with the funds to support the student while they study. Ideally you will have the cash upfront to cover costs, a part-time job or freelance work to cashflow things is super-commendable.
But students can also take out student loans to help cover living costs, a bit of overseas travel or a car (i.e. all the fun stuff that young people want but don’t have the money for… also known as ‘living beyond your means’). There are a number of options available – it depends on individual needs, the debt endurance capacity of the applicant, and requirements of the selected course.
Benefits
Student loans in Australia offer :
- Choose fixed rate or variable rates
- Flexibility to pay back the loan fast without penalty
- No need to put a security up against the loan
- Loans are fairly easily available for qualifying students
Drawbacks
- You’re putting yourself in debt that you need to pay back with interest
- You need to have some income to pay off the monthly repayments
- Unless you’re taking out the loan for a big one-off item then you’d be better to find a credit card with low interest rate
In the end
The life of a student is one of the most unforgettable phases that is filled with fun, but at the same time intertwined with instants of anticipation of results and an optimistic future. There’s going to be financial concerns around paying for living expenses, excursions, laptops, phone, clothing, projects, travel, textbooks and stationary etc. Depending on your families level of support, your course, where you’re studying and your part-time job, its good to know you can take out a loan if you really really need it.
But don’t take out a student loan or student credit card to spend it on stuff you don’t really need.
Student loans beyond HEC’s and the use of a low rate credit cards can offer a helping hand and allow full-time students (people who study 30-40 hours per week) to cash flow things.
Credit Cards That are Ideal for Students
| Credit Card Offer | Purchase Rate (p.a.) | Balance Transfer (p.a.) | Annual Fee | Apply now | ||
|---|---|---|---|---|---|---|
| rate | period | |||||
|
Westpac Low Rate Credit Card NO annual fee 1st year. Low 1.9% pa. for 9 months on purchases. Hurry! Apply before 02 July 2012. |
1.9% | 3.99% | 6 months | $0 |
Featured Card |
|
ANZ First Visa Credit Card Ideal first credit card. 60 second approval. Decent balance transfer offer. |
19.39% | 2.9% | 12 months | $0 |
Editor’s Choice |
Image: stuartpilbrow
David is Co-Founder of 
David Boyd
Andrew Boyd
St.George Vertigo MasterCard
ANZ Platinum Credit Card
HSBC Credit Card