Credit Card Tutorials

Six Mistakes Committed By Students When Using Credit Cards

As students are mostly at the start of their financial life, they have virtually no idea about the importance of personal finance management or credit history. Most of the students do several mistakes when using credit cards. Here are six of them.

1. Thinking that using many credit cards can improve credit score and credit history. This is a very serious mistake and it may ruin their financial situations for years to come. They need to be financially strong to maintain more than one card at one time. Each card must be paid in full each month. And the logic also doesn’t work. If they have enough income to maintain six cards, they may not need a credit card at all! For most students it becomes next to impossible to maintain the payment schedules of many cards. Ultimately delayed or non-payment payment on a card or two cards will result in lower credit score.

2. Carrying over the balances when the month ends. This habit may result in lot of penalties and fees over a long period of time. It will finally increase their expenses over time. Timely payment is also essential to instill financial discipline for years to come

3. Paying minimum balance each month. Although it may seem like a good idea to reduce monthly expenses, students can lose a good deal of money on interest alone. With minimum payments, students may actually pay twice the actual amount of the loan when it’s finally paid off.

4. Accepting soft terms without enough research. Card companies work for profit. They’ll charge a similar amount of interest rate on late payments to students using their cards. Those companies won’t reduce or waive penalties because their consumers are students. They should read all the fine prints to determine whether soft terms or interest-free period are really advantageous.

5. Thinking that their personal details are safe with the dealer. Most students are not familiar with the intricacies of financial process and they often feel that submitting personal information to the card companies is safe. They feel that the lenders won’t leak out their critical details so the likelihood of identity theft is quite low. This is a very dangerous mistake. There may not be information leakage from lenders but the dealers accepting credit cards do not have appropriate rights over consumer data. Students need to be selective and prudent while handing over their personal details because an identity theft can hurt them financially and damage their credit score without warning

6. Over-purchasing payment protection insurance. Some students are taken in by credit card companies (working together with financial institutions) and purchased payment protection insurance far more than they need. This results in unnecessary spending. Fortunately, there are companies out there which specialises in helping consumers to make a ppi claim.