For students and those who have recently turned 18, now is when you will begin to think about applying for your first credit card. However, before just diving straight into the world of plastic purchasing, you should consider how ready you are to cope with the financial responsibility of having access to money that you have not yet earned.
Owning your first credit card is a substantial responsibility, as it can be very easy, especially at first, to max out your credit limit. Paying with a credit card can have the effect of desensitizing you to the value of purchases; rather than counting out and handing across the physical value of the transaction you simply swipe a card; before you realise you can have accumulated hundreds of dollars worth of debt without much of a thought as to what your money is being spent on.
Consider how you have handled money in the past. If you tend to spend money as soon as it comes into your debit account, then you would probably be more likely to overshoot your earnings and land yourself in debt. If you have borrowed substantial amounts from family or friends, think about how reliable you have been with paying them back. If in the past you delayed the repayment of your debt in favour of spending money on personal and perhaps unnecessary expenses, then you may not have the financial responsibility for credit card ownership yet.
If you have a job, then make sure that your income is enough to cover all of your expenses, and don’t count on the idea that you can pay for an excessive expense with your next week’s pay; if you allow yourself to justify purchases in that way then you will only find yourself in debt. If you are unable to juggle tertiary studies and a part time job, and are relying on the support of your parents, then talk to them about what they are willing to pay for; if you are constantly making purchases that they don’t want to repay, you will receive a bad credit rating and find it hard to apply for future credit cards or loans.
If you do decide to apply for a credit card, make sure that just because you have the ability to make a purchase, you still consider the necessity of what you are paying for, and avoid impulse buying. Frequently checking your bank statements is also a good idea, as you can monitor how much you spend. It also gives you an opportunity to see where your money is going; you can notice if an excessive amount of money is being spent on short term indulgences, such as fast food or magazines.
There are credit cards specifically designed for students, with features to fit your needs and budget. A student credit card is usually the first experience with credit and debt, and it can either be the foundation for good financial habits and a respectable credit rating, or it can be misused and leave you with substantial debt and a poor chance of successful credit and loan applications in the future. It is important to apply for a credit card only when you feel comfortable with the responsibility that is required.
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