Just how much do you really know about life with a student credit card? If you think the average student credit card is used for nothing but textbooks, calculators and pens, you may want to think twice. What some students use their credit cards for might just surprise (and even shock) you. If you want to make sure a student credit card doesn't lead to the demise of your student, you need to keep the following in mind...
1. Understand that Parents Need To be Teachers
We send our kids off to school for an education and many of us forget that a good portion of our children's learning needs to start at home. Yes, the schools will teach our children the fundamentals of finance; but we, as parents, need to teach our kids the basics of responsible spending and proper use of a student credit card.
2. Know the Facts
Knowledge is power, and knowing the facts about student credit card use is like taking a set of blinders off. A student credit card study was conducted by a professor named Manning. What Manning discovered should be a wakeup call to parents everywhere.
Perhaps one of the most disheartening findings of Manning's study is that three out of five students with a student credit card maxed out that card during their freshman year. This means that kids aren't even halfway through school and they're maxing out their plastic. Not a good start in the financial life of a soon-to-be adult.
Another upsetting fact that Manning's study uncovered was that some students were using their student loans to pay their student credit card bills. I'm betting it wasn't educational expenses that racked up that credit card debt in the first place.
Add the above issues to the fact that the average number of credit cards per student is 2.8, that almost half of college students carry a balance of $3,000 or more on their cards and that the drop out rate at colleges due to financial pressure is 8.5 percent (higher than the rate for academic failure), and the situation becomes even uglier.
3. Keep It In Perspective
So what can we do about all of this?
First, we have to understand that the student credit card is not the enemy. In fact, student credit cards are valuable tools that can help students build the credit history they'll need to survive when they graduate.
That being said, we do have to teach our kids about responsible credit card spending. If our child gets a student credit card, we have to be sure they understand that it is not a ticket for a spending spree nor is it a way to finance a bar-hopping binge.
Student credit cards should not be banned, nor should they be avoided. A student credit card should, however, be used for emergencies only. Then, and only then, can we be sure that the card will do our students more good than harm.
A business credit card can speed up the process of doing business. This applies to both online and offline transactions. It's a good way of paying for company purchases or making payments quickly.
Why Have A Business Credit Card?
Business credit card deals may be better than those available for personal credit cards. For example, there may be lower annual percentage rates (APRs), waiver of annual fees, higher credit limits and other incentives. Business credit cards also offer the same incentives as personal credit cards, such as balance transfer deals and 0% interest periods. And if you don't like the deal offered, it's always possible to negotiate.
Expense Tracking
Business credit cards are a good way of tracking expenses. This applies to both company expenses and the expenses incurred by employees on the company's behalf. They are also a good way of improving cash flow as business owners can pay for something today and have a grace period of up to 56 days before having to settle the bill.
Help For Employees
Employees can use business credit cards when travelling on company business to pay for flights and other travel, accommodation, eating out and entertaining. This means employees don't have to worry about finding money and being reimbursed. It also means that businesses can keep track of company expenses through itemised credit card statements. Businesses usually get a monthly statement where all such transactions are listed.
Choosing A Business Credit Card
When choosing a business credit card, it is best to pay attention to:
- The APR - The credit limit - The grace period - Repayment options - Annual fees - Application fees - Cash withdrawal fees
Since companies get monthly statements, they have to spend less time on administration. There's no longer any need to work out and check employees' expense claims, though some businesses may prefer to have that process as a backup.
Other Business Card Options
Business owners can also choose to have a business debit card. This means they can only spend what is in the business account. Another option is a business charge card. There is usually an annual fee for this and the balance has to be settled in full each month. Neither of these options is as flexible as a business credit card.
Some small businesses may start by financing their business with a personal credit card. However, this makes it more difficult to separate personal and business expenses. In addition, you will be personally liable for any spending on the personal credit card. A better option is to get a business bank loan or overdraft. This will offer better interest rates and will not endanger personal finances.
Both Max Anderson & Joe Kenny are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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