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Tag: Credit cards

  • Credit Cards: The Good, The Bad and The Ugly

    Credit Cards: The Good, The Bad and The Ugly

    “Charge it!”  It may feel great to just swipe a plastic card and that brand new shiny Michael Kors purse is now yours to enjoy.  But by the time you are at the next party  showing off your purse, the credit card bill is in the mail and soon you will have to pay for the purse.  You have following options; to pay your bill in full, make a partial payment or  pay the “minimum” payment.  But beware – once you start paying only a portion of your credit card bill, you will be charged interest the next month and this is where financial hardships can begin! The word “debt” is one that many students are familiar with because often they are already dealing with student loans due to high tuition costs.  Once students get into a habit of “charging” their purchases, they can easily fall into the debt trap and this is one of the risks associated with carrying a credit card.

    Risks:
    -may damage your credit score if your payments are late or you don’t pay the balance owing.
    -high interest rates.
    -you may carry an on-going debt that you find difficult to pay off.

    However, there are many benefits of credit card usage if the card is used for the right reasons and in a responsible manner!

    Benefits:
    -lets you borrow money instantly to make purchases.
    -allows you to carry less cash.
    -helps you establish a good credit history and earn a good credit score.
    -provides a free form of credit if you pay the balance in full and on time.
    -the card may provide a rewards program which can be used towards free travel or other items.

    In summary, it is beneficial to get a student credit card only if you plan to use it responsibly by not letting the risks outweigh the benefits. Try to find a card in which you obtain points on every purchase made.  This may lead you to a free trip of your choice! Think of being on the sunny beach forgetting about the books, all thanks to redeeming the points on your credit card. But remember that you won’t be able to enjoy that beach trip if your debt load and interest charges are accruing. Credit cards are the ultimate test in your new adult responsibilities.

  • Credit Cards: The Good, The Bad and The Ugly

    Credit Cards: The Good, The Bad and The Ugly

    “Charge it!”  It may feel great to just swipe a plastic card and that brand new shiny Michael Kors purse is now yours to enjoy.  But by the time you are at the next party  showing off your purse, the credit card bill is in the mail and soon you will have to pay for the purse.  You have following options; to pay your bill in full, make a partial payment or  pay the “minimum” payment.  But beware – once you start paying only a portion of your credit card bill, you will be charged interest the next month and this is where financial hardships can begin! The word “debt” is one that many students are familiar with because often they are already dealing with student loans due to high tuition costs.  Once students get into a habit of “charging” their purchases, they can easily fall into the debt trap and this is one of the risks associated with carrying a credit card.

    Risks:
    -may damage your credit score if your payments are late or you don’t pay the balance owing.
    -high interest rates.
    -you may carry an on-going debt that you find difficult to pay off.

    However, there are many benefits of credit card usage if the card is used for the right reasons and in a responsible manner!

    Benefits:
    -lets you borrow money instantly to make purchases.
    -allows you to carry less cash.
    -helps you establish a good credit history and earn a good credit score.
    -provides a free form of credit if you pay the balance in full and on time.
    -the card may provide a rewards program which can be used towards free travel or other items.

    In summary, it is beneficial to get a student credit card only if you plan to use it responsibly by not letting the risks outweigh the benefits. Try to find a card in which you obtain points on every purchase made.  This may lead you to a free trip of your choice! Think of being on the sunny beach forgetting about the books, all thanks to redeeming the points on your credit card. But remember that you won’t be able to enjoy that beach trip if your debt load and interest charges are accruing. Credit cards are the ultimate test in your new adult responsibilities.

  • The Dangers of Student Credit Cards

    The Dangers of Student Credit Cards

    For many young people, the temptation of their first credit card is too much to resist. That is why credit card companies will often set up booths on college and university campuses across Canada to tempt you with free gifts and low interest rates for signing up with them. While credit cards can be an excellent way to build your credit rating, the responsibility that comes with owning one cannot be overlooked.

    When I first entered college, I saw a booth on campus advertising free NHL hockey blankets for signing up. Not only that, but acceptance was virtually guaranteed. For someone fresh out of high school, a credit card makes you feel important and like an adult. Being able to use it whenever you want to buy clothes, electronics, make-up and more is a thrill. The thrill will soon wear off when you realize that you have used up most of your credit limit in only a few months and have no way to pay it off.

    Credit cards should not be taken lightly. While the company may advertise an interest rate of 1.99%, this is often only an introductory offer and the rate will skyrocket to 18% or higher after your first month. This means, on a $100 purchase, you will be paying $18 in interest directly to the credit card company. Over several months of not paying off your balance in full, this quickly adds up. Soon you will owe hundreds of dollars that you didn’t even spend!

    If you do decide to sign up for a credit card, there are several things you can do to reduce the temptation of overspending. The first, and most important, is to make sure you have the funds needed to pay off your balance before you even use your credit card. Paying off your balance in full each month is an excellent way to build a credit rating, as you are showing the bank that you are responsible and have a steady income. The second is to leave your credit card at home and do not carry it with you in your wallet. This tactic helps to eliminate the temptation of overspending and using the card for purchases you do not need.

    Of course, there is always online shopping. Online shopping should only be done when absolutely necessary (for Christmas gifts, for example). It is also advisable to get a credit card with a low credit limit – $1000 should be your absolute maximum. Anything higher and you run the risk of using it frivolously.

    Credit cards can be an excellent tool for building your credit rating and establishing yourself, if used responsibly. If you decide to sign up for a credit card, ensure you take the steps outlined above to reduce overspending and, ultimately, reduce your stress level. After all, who needs extra stress during exams?

  • Beware of Credit Cards

    Beware of Credit Cards

    Get your free stuff!

    Free CD’s, T-shirts, mugs, hats; They’re all yours and they’re all free if you sign up for a credit card.

    Sounds great, doesn’t it?

    Free swag and your very own credit card. So what should you buy first? Maybe some jeans to go with your new t-shirt, or how about a stereo to play your new CD? On second thought, why don’t you buy it all? After all, you can pay for it later, right?

    Wrong.

    Each year young adults across Canada fall into the credit card trap. It’s easy to operate under the “buy now, pay later” mentality, but a few impulse purchases now can lead to costly mistakes over time.

    According to a 2008 study by the Financial Consumer Agency of Canada, 6 in 10 Canadians between the ages of 18 and 29 had some credit card debt, and at least half of those reported their debt load to be “more than they can handle”.

    72% of young Canadians have credit cards. However, most of them are unaware of the problems they can face if they don’t monitor their usage.

    Credit card companies can raise your credit limit without your consent. So you should always be aware of how much you spend. Don’t assume if you have a $500 limit you’ll be declined if you reach it. The company may have raised your limit to $3000 causing you to spend more than you intended.

    You also need to be aware of interest rates, as they can add up quickly if you don’t pay your monthly balance in full.

    For example, let’s say you owe $1000 and you only make the minimum monthly payments. At an interest rate of 18%, it would take you 12 years to pay off your bill.

    Don’t let flashy cards with your school crest or the logo of your favorite sports team and free stuff be your financial downfall.

    Remember, what you do today affects tomorrow. Careless use of credit cards now can seriously damage your credit rating in the future. This will make it very difficult to buy a car, rent an apartment, start a business, start a family or buy your first house.

    Spend smart!