Twenties Economics | Credit Cards
Hello Everyone,
I hope all is well!
In today’s episode we will discuss credit. I know - scary! However, at some point in your life, you may need to borrow money to make a large purchase, such as a car or a home. Having a strong credit score can make it easier to get approved for financing and can result in lower interest rates, which can save you money over time. Without a good credit score, you may find it challenging to get approved for loans, and if you do, you may end up paying higher interest rates.
So, without further adieu, let’s get into it!
Understanding Credit: A Guide for University Students
So, first, we must define what credit is. And credit is an essential financial concept that can have a significant impact on your life. Essentially, credit is the ability to borrow money with the expectation that it will be paid back over time, typically with interest. This can come in the form of credit cards, loans, or other types of financing. As a university student, it's crucial to understand credit and how it works. Here are a few reasons why you should take the time to learn about credit
1. Building Credit Takes Time
Your credit score is a reflection of your credit history, which means that it takes time to build up a good score. By starting to build credit early in your life, you give yourself more time to establish a positive credit history, which can help you in the long run. It's essential to understand that building good credit takes time, and you need to be patient and consistent with your credit habits.
2. Credit Scores Can Impact Your Job Prospects
In some cases, potential employers may check your credit score as part of the hiring process. A poor credit score could impact your ability to get hired for certain positions. This is especially true for jobs that involve handling money or financial transactions. Therefore, it's crucial to start building your credit early in your life to avoid any negative impact on your job prospects.
3. Credit Scores Can Impact Your Wants and Needs
Having a good credit score is important for university students seeking to rent an apartment or purchase a car. Landlords and car dealerships check credit scores as part of their application process to assess creditworthiness. A high credit score signals to these entities that a student is responsible with credit and has a history of paying bills on time. In contrast, a low credit score can be a red flag and make it more challenging for students to secure financing.
A low credit score can result in a higher interest rate on loans or credit accounts, making it more expensive for students to borrow money. In some cases, a low credit score may even require a co-signer to secure the loan. Students who have a low credit score may also have trouble finding an apartment to rent. Landlords are hesitant to accept tenants with a history of missed or late payments and may require a higher security deposit or proof of income.
To avoid these challenges, university students should make a point to monitor their credit scores regularly and take steps to improve them if necessary. This can be done by paying bills on time, keeping credit utilization low, and avoiding new credit applications. Additionally, students may want to consider opening a credit card account, as this can be a great way to start building credit. However, it's important to use credit cards responsibly and avoid maxing out the credit limit or making late payments.
Improving credit scores can take time, but the effort can pay off in the long run. A good credit score can help university students secure loans, obtain credit cards with favorable terms, and achieve their financial goals. Therefore, it's essential for students to make building good credit habits a part of their financial routine. By doing so, they can set themselves up for a strong financial future and make positive impacts on their communities.
So, how can university students start building their credit?
Open a credit card account: A credit card can be a great way to start building credit, as long as you use it responsibly. Look for a card with a low interest rate and no annual fee, and make sure to pay off your balance in full each month. To alleviate some fears I recommend that you follow these tips:
Make payments on time: Late payments can have a negative impact on your credit score, so it's important to make all of your payments on time. Set up automatic payments or reminders to help you stay on track.
Keep your credit utilization low: Your credit utilization is the amount of credit you're using compared to your total credit limit. Keeping your utilization low (ideally below 30%) can help boost your credit score. Avoid applying for multiple credit cards at once as it can negatively impact your credit score.
Spend your credit card like it’s a debit card: By using your credit card to pay only on what you can afford will save you much heartache later on.
Do you have any that you’d recommend?
When it comes to finding the right credit card for university students, there are a few factors to consider. In addition to the rewards and benefits offered by the card, it's important to look at the interest rate, annual fee, and credit limit. Here are some top credit cards for university students:
Chase Freedom Student Credit Card - is a great credit card option for university students who want to build credit and earn rewards. With no annual fee and a low-interest rate, this card offers 1% cash back on all purchases. Additionally, new cardholders can earn a $50 cash bonus after their first purchases and 5% cashback on Lyft rides. The card also offers a unique feature called Credit Journey, which provides free access to your credit score and tools to help you monitor and improve your credit. Overall, the Chase Freedom Student Credit Card is a great choice for students who want to start building credit and earning rewards.
Chase Freedom Unlimited - This card is a great choice for students looking to build credit and earn rewards. In addition to offering unlimited cash back on all purchases, the card also has a low-interest rate and no annual fee. Plus, cardholders can earn a $200 cash bonus after spending $500 in the first three months of opening an account.
Discover it Student Cash Back - With this card, students can earn cash back rewards on purchases, as well as a $20 statement credit for good grades. The card has a low-interest rate and no annual fee, making it a good option for students who are just starting to build credit. Plus, the card offers a unique feature called Cashback Match, which matches all the cash-back rewards earned during the first year.
Capital One Quicksilver - This card is another great option for students who want to earn cash-back rewards. Cardholders can earn unlimited 1.5% cash back on all purchases, and there's no annual fee or foreign transaction fee. Additionally, new cardholders can earn a $150 cash bonus after spending $500 in the first three months of opening an account. The card also has a low-interest rate and a credit limit that can be increased over time with responsible use
Apple Credit Card - For starters the card is made out of pure titanium. There are No annual fees, no late fees, no foreign transaction fees. Cardholders can earn 3% on apple products and select merchants when you use Apple Card with Apple Pay. Earn 2% Every time you use Apple Card with Apple Pay. And 1% on all purchases where Apple Pay isn’t accepted.
I hope this helps!
All the Best,
LiyaElle KSco.