A credit card is more than just a charge card. While it's great for emergencies, it also represents the first step towards building a good credit history. But it’s important to be realistic about your needs and your ability to manage credit responsibly so that your credit card serves as an effective and flexible payment tool rather than a pathway to debt.
Nancy Marescotti, Director, Card Marketing, BMO Bank of Montreal, offers the following advice to give students the credit card smarts they’ll need before applying for their first card.
Know your limit
A credit card is not a blank cheque and shouldn’t be treated like one. Pick a card with a low introductory credit limit. The limit on your card helps protect you from overspending. If you know you will not be able to resist splurging, ask to have your limit reduced to a level you can manage.
Not all cards are created equal
They come with a variety of rewards, features, fee structures and interest rates. Take the time to shop around and choose a card that suits your personal circumstances and specific needs.
Don’t be fooled by introductory "teaser" rates
If you believe that you may need to carry a balance, pick a card that offers a low annual interest rate as your interest rate can make a significant difference in what you pay. But don’t be fooled by ‘teaser’ rates that entice you with a short-lived low introductory rate. Once the introductory period is up, your interest rate could skyrocket.
Get more out of your credit card with discounts and rewards
The BMO SPC MasterCard comes with an option to lower your interest rate without giving up any of the benefits of the BMO MasterCard credit card: Discounts – Exclusive Student Price Club discounts and savings on clothes, shoes, accessories, sporting goods, restaurants, entertainment, travel and other services at thousands of SPC Card retailers at no added fee. Rewards – The BMO SPC MasterCard provides built-in AIR MILES or CashBack rewards at no added fee. If you anticipate travelling throughout the school year to see family or friends, a card that earns rewards with every purchase, such as AIR MILES, makes sense. AIR MILES reward miles can be redeemed for flights, bus tickets, merchandise and more. If, on the other hand, you would rather earn immediate savings, a CashBack reward option will put money back in your pocket for every purchase you make.
Ink the deal
Be sure to sign your credit card as soon as you receive it.
Pay it off
Always try to pay your balance in full every month by the statement due date. Otherwise you will be charged interest. At the very least, make the minimum monthly payment and if you can, try to pay more than the minimum balance due since the faster you pay off the balance, the less interest you will pay.
Build a good history
Once you’ve chosen your credit card, use it responsibly. Start building a good credit score by paying your balance or minimum monthly payment on time. A bad credit rating can have a negative impact when you want to get a loan, buy a car or condo or even get the job you want.
Be loan smart
The ability to get a cash advance on your card is great for emergencies, but you'll be charged interest from the moment the cash is in your hands. Try to avoid taking cash advances on your credit card if at all possible.
Protect your identity
Save yourself (and your credit) from identify theft. When you make an online purchase, make sure the website has security features so that your information does not fall into criminal hands. If you are providing your credit card information to a merchant over the phone, ensure the merchant is reputable. Lastly, do not share your credit card with friends -- any slipup can put your credit at risk.
What's required
Usually, to apply for a student credit card you must:
Be a permanent Canadian resident;
Be of age of majority in your province or territory;
Be a full-time student at a recognized college or university;
Earn annual income from employment, scholarship/grant, student loan or family allowance.
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