4 money mistakes university students often make
By UK CreditCards.com
We all know that university is a time of struggle for students who must live the frugal life just to get by.
For most students, their outgoings are usually far higher than their income, meaning that they have to use credit to fill in the gaps. Unfortunately, if credit isn't used properly, it can wreak havoc on students' financial futures.
Here's how to get through university in one financial piece and avoid the top student money mistakes that get far too many into trouble.Student money mistake no. 1: Paying credit card bills late.
Making late payments on your bills now might not seem too important; but it can have a serious impact on your credit rating and make it difficult for you to obtain affordable credit in the future, rent a flat, buy a house or even get a job. It makes no difference whether you miss an instalment on your car insurance or your credit card bill. Both will negatively impact your credit history.
Tip: Try and get yourself a credit-builder credit card and use it solely as a vehicle to improve your credit rating. Spend around 60% of the credit limit each month and then pay off the balance immediately. This will show lenders that you can be responsible with money, and your missed payments were more of a slip-up than a lifestyle trend.
Student money mistake no. 2: Taking advantage of too many offers.
When you go to university, you will suddenly be confronted with a host of credit options that probably were never available to you before. Financial companies often try and lure students in by offering free gifts and discounts when they open accounts.
Unfortunately, if you take advantage of too many of these offers, whether you use them or not, you will hurt your credit score. Lenders don't like to see too many open accounts because it makes you look like a bigger credit risk. Taking advantage of too many credit offers may also tempt you to overspend and rack up unmanageable balances. Instead, you are better off building a healthy credit rating over a long period of time by limiting the number of accounts you have open to a manageable amount and using your accounts responsibly.
Tip: Close any accounts that you do not use on a regular basis. As for those that you leave open, ensure that the payments are up to date and the outstanding balances are cleared where possible.
Student money mistake no. 3: Abusing interest-free overdrafts.
The majority of university students will apply for a student bank account, which provides many benefits, including cinema tickets and other perks, as well as a 0% overdraft. Unfortunately, students often treat this 0% overdraft as free money and spend their way through it before they have even finished Fresher's Week.
Tip: Try and get another 0% overdraft before the time period is up and transfer the balance, helping you pay down your debt quicker.
Student money mistake no. 4: Failing to budget.
Taking control of your finances is something that you have to learn at a relatively early age, as you are suddenly thrown into a world of bills, credit and money. Unfortunately, not many students realize they need to budget properly and be fully aware of the money entering and leaving their account each month. However, this is the only way you will know how much you can afford to spend.
Not budgeting properly can lead to further problems down the road as you will automatically head into your overdraft -- which isn't free money -- or use an expensive credit card to borrow.
Tip: Make a monthly plan which includes any debt repayments you need to make as well as your typical monthly outgoings. Plan to pay off the debt as cheaply as possible by looking for credit with 0% interest and repaying the balance before the promotional period expires.
Published: 18 August 2011
- What borrowing options are best for graduates? – Without student loans, you may need a "grown-up" way of borrowing. Here are some options to choose from ...
- 4 credit tips for students – As students begin their time at university, they may be using credit for the first time. Here are four tips for students to keep in mind ...
- What are millennials' real attitudes toward debt? – Young adults aged 18 to about 34 have been characterised by their spontaneous, live-in-the-moment attitudes. But does that mindset carry over to debt and credit, too? ...