Talking about credit and students in the same sentence is perhaps a no-go for anyone who is realistically pragmatic about their financial affairs, but as with everything under the sun, if it’s approached correctly and in the way it was originally intended then a credit facility can work out to be very useful for students.
You’d definitely have to be savvy about how you use whatever little credit is made available to you and you definitely have to maintain a high level of sustained discipline. Otherwise you can build up a very good credit record during your student years, which could come in extremely handy once you’re out in the big bad world.
Don’t Use Credit on Consumer Goods
You’ll be surprised at how easily credit is made available to students these days, offered to us in the form of clothing store accounts and via bank accounts which come with a built-in credit facility. With the banks however, your parents or your sponsors effectively have to put themselves up as some sort of surety. Either way, buying clothes on credit is a bad idea, so too buying any consumer goods on credit. The only reason you might want to do that is if you want to build up a record of paying your debt as quickly as possible.
You’ll have to check out the specific terms of your credit facility arrangement, but generally there’s a short period between the time of purchase on credit and the point at which you have to effectively start making re-payments. During that time, there’s a window of opportunity in which no interest is charged on outstanding repayments settled, but any repayment made counts as a tick behind your name for “honouring your repayment.” Making late payments can negatively impact your credit.
That pretty much works wonders in constructing a good credit record, but if you fall into the trap of using credit to stock up on consumer goods and then subsequently start battling to make the repayments, you can very quickly build up a bad credit record, which can prove to be very difficult to fix in future.
So as a simple example, if you have a no-interest grace period of something like a week before you start getting charged interest on the repayments you’re obliged to make, then buy using your credit card or credit facility, but be sure to settle the full amount within that grace period.
You won’t have lost anything at all, but will have gained some credit rating points for demonstrating the ability to honour your debt. You’ll probably also earn some shopper points or an equivalent reward as part of some or other loyalty programme operated either by the credit provider or the store at which you shop.
