Lack of Financial Literacy Holding Back Millennials

by Shelton on February 26th, 2016

filed under Student Credit Cards

Inadequate financial knowledge has put many Millennials in dire financial circumstances, according to a survey conducted by PricewaterhouseCoopers (PwC) and George Washington University. In fact, when given a test about complicated issues, such as bond concepts, inflation and risk diversification, only 24% demonstrated basic financial knowledge and just 8% showed high financial literacy.

The report analyzed the financial characteristics of more than 5,500 respondents aged 23-35 and found this lack of financial literacy is jeopardizing Millennials’ future financial success. Key findings include:

Satisfaction
34% of Millennials are very unsatisfied (1-3 on a scale of 1-10) with their current financial situation. 18% are not at all satisfied.

Student Loans
54% are concerned about their ability to repay their student loans. Even those with a sizable salary ($75,000 or above) are worried. 34% of this economic bracket said they are not sure they will be able to repay their student loans.

Long-Term Debt
For Millennials, debt crosses economic and educational lines. Among college-education Millennials, 81% have at least one long-term debt, compared to only 2/3 of people in other demographics. 30% of all Millennials and 44% of college-education Millennials carry more than one long-term obligation. The numbers indicate that a college degree may no longer guarantee a better financial future.

Unprepared for Emergencies
This generation is having a tough time making ends meet. Nearly 30% are overdrawing their checking accounts and most are unprepared for emergencies. Nearly 50% said they could not come up with an extra $2,000 if they needed it, and 53% are carrying balances on their credit cards.

Alternative Financial Services (AFS)
Millennials are heavy users of AFS, such as payday loans, pawnshops, auto title loans, tax refund advances and rent-to-own products. In the past five years, 42% of Millennials have used these products. 50% of those users had a high school degree or less and 28% had a college degree. Even those with bank accounts (39%) and credit cards (35%) are using alternative financial services.

Retirement
Only 36% of Millennials have a retirement account, and many are tapping into their retirement to make ends meet. More than 20% took a loan against their accounts and 14% made a hardship withdrawal.

Not Seeking Assistance
Even though they do not posses adequate financial knowledge, only 27% of Millennials are seeking professional financial advice on savings and retirement, and a mere 12% sought assistance on debt management.

PwC believes this cycle can only be broken through financial education. In 2012, they launched the Earn Your Future program, which invests in helping students develop financial skills by providing educators with the resources and training they need.

From saving to investing: Tips to teach your children the value of cash

by Shelton on February 23rd, 2016

filed under Student Credit Cards

GETTY

It’s never too early to learn to save

Children pick up some strange ideas about money from adults. They watch us fill up a supermarket trolley then all we do is hand over a piece of plastic and maybe even get a wad of notes in return if weve asked for cashback. Its probably not their fault that they think the supermarket is paying us to take stuff home.

And its no wonder that when 15 year olds are asked how long it would take to pay off a pound;3,000 credit card bill if they just paid the minimum amount each month, they think its about a year. Its actually 40 years.

As parents, we tend not to talk about money: it can be seen as a bit vulgar and we dont want to burden them with adult worries. As of September 2014, financial education is on the secondary-school curriculum, but it takes a lot more than an hour or two to teach financial literacy vital in an age when the average households credit card debts/overdrafts are predicted to reach pound;10,000 by the end of 2016.

Money can still be a taboo subject in the UK, says Steve Stillwell of financial education charity Young Enterprise. A survey of children by Halifax last summer found that young people do think about money and are worried about it they actually want to talk to their parents about it.

So heres how we can teach children of all age groups about managing their moneyhellip;

Ages four to 10

Talk about money

Dont be squeamish: explain how money works, how adults earn it and have to work out how much they can afford to buy with it and that banks arent giving you free money when you visit the cashpoint. Play games involving money such as shops or board games like Monopoly to unleash their inner stockbroker/property developer.

Let them hand over money in shops and count the change; take them shopping for their lunch box and work out how much each item costs.

Get into good habits with pocket money

Give pocket money from five years old, or at the latest seven, as research shows a childs attitude to money is fixed by the age of seven or eight, which is sobering. Cash is best at this age so they can touch and feel it, and begin to understand the concept of coins and notes. Avoid giving a token pound;1, which wont teach them much (other than you cant get much for a pound).

The average amount in the UK is pound;6.35 a week for eight to 15 year olds. Dont forget to give it regularly. One option is Roosterbank, designed for children aged six and above, a kind of online virtual piggy bank where you keep track of your childs money via an app. You can add money (when pocket money is due or theyve completed a chore) or take it away (when they buy something).

GETTY

Get them thinking about what they’ve bought and whether it was worth it

Start the saving bug

Its never too early to learn to save. Ron Lieber, author of The Opposite Of Spoiled (Harper, pound;18.99), recommends having three jars for your childs pocket money: one for spending, one for saving and one for giving to charity.

Its a graphic way to see where their money is going. Try for a 60:30:10 split. You can give natures big spenders a powerful incentive to save by promising to match anything they manage to save pound for pound or (if thats too generous) paying them interest on their savings jar.

Was it worth it?

Get them thinking about what theyve bought and whether it was worth it by dragging out all their must-have toys and asking them how they rate them now. Was each one worth the money? Would they still choose it? Did they only want it because friends had it or it was on TV?

Go to the shop and look at any toy they say they want so they can really examine it and find out if its value for money.

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Shop around for a savings account for them

Ages 11 to 15

Set a realistic allowance

Gradually move from weekly pocket money to a fortnightly then monthly allowance by 13 to 14, says Jonathan Self, author of The Teenagers Guide To Money (Quercus, pound;8.99) 14frac12; is the average age for a monthly allowance. Be clear about what it needs to cover (toiletries, presents, cinema) so its realistic. Give extra for well-completed chores. But dont bail them out if theyve made a bad decision.

My son went without a winter coat for two months because he spent the money for it on a concert. As a result, he became extremely astute about balancing his budget, Stillwell says. It does pay to be a bit harsh on this, even though its difficult. Because, lsquo;Dad, can you lend me some money? really means, lsquo;Dad, can you give me some money? Its important they learn to save up for trips and treats and plan their spending, rather than using the Bank of Mum and Dad every time they run out.

Track their money

It can be hard to keep track of your budget when so many purchases are made online on gaming and downloads which is where a pre-paid card such as GoHenry or Osper can be useful.

Parents load the card (for a small fee) and the child can buy online or take cash out. They can keep track of what is coming and going from their account via a mini banking app, says Hannah Maundrell, editor in chief of comparison website money.co.uk. It puts them in control and its like a little game. If they get their allowance on the same day each month, its like getting a wage and they can plot how to make it last.

Open a savings account

Shop around for a savings account for them some childrens accounts have interest rates of four to six per cent. Get them involved in choosing it: go on the comparison websites and explain how interest works so they really feel involved in the process, says Maundrell. Get them into the habit of putting some of their allowance aside as savings say 30 per cent.

Trade down on brands

Teenagers can be naive consumers. Parents can help them manage their budgets by encouraging savvier habits such as trying cheaper brands until they find the cheapest acceptable one. On the Barclays Money Skills website the Want or Need game gets teens to analyse a purchase, such as the latest iPhone, then how they are going to save for it.

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Teach them to be savvy

Age 16-plus

Talk credit

Half of Englands teenagers have some kind of debt by 17, so its vital for parents to explain how credit cards work: its amazing how many teenagers think its practically free money. When I turned 18, I went out shopping with my friends and one of them took out a store card at Topshop, then realised she had spent pound;300 and had no way to pay it back, recalls Maundrell. Explain compound interest and list the worst kinds of credit: pay-day loans, store cards and student credit cards, which can have interest rates of 18 to 25 per cent.

Get saving and investing

From 16, children can have their own ISA (its 18 for stocks and shares ISAs), which is a good way to save if theyve got regular money coming in from grandparents or a small windfall you can invest up to pound;15,000 a year. If theyre keen to learn about investing, most share-dealing providers offer demo accounts where you practise investing with virtual money until youre old (and rich) enough to do it for real.

Satyavrat Mishra: Taxing times ahead under Nitish

by Shelton on January 31st, 2016

filed under Student Credit Cards

People in Bihar woke up on Wednesday to a shock, with more than snacks to chew over. The Nitish Kumar government imposed higher taxes on various items including packaged food, dry fruits, flour, refined flour, auto parts, inverters and batteries, saris, sand, cosmetics and mosquito repellents. Even edibles such as potato chips, sweets, samosas and kachauris were not spared.

The decision, which invited criticism from people and Opposition parties, was termed necessary by the government for funding development projects. These are mainly luxury items, used by the affluent. It will enhance revenue collection of the government, which would be used for the all-round development of Bihar, said Brajesh Mehrotra, Principal Secretary, Cabinet Secretariat.

However, sources say the real reason behind the decision is to minimise the impending revenue loss that would result from the partial ban on liquor from the next fiscal. The government has decided to ban the sale of country and spiced liquor and shut down almost 90 per cent of the liquor shops in Bihar from April 1, which is estimated to cost around Rs 2,000 crore to the state exchequer. The government is trying its best to make up for the losses by tapping other sources. However, the step to impose taxes, despite being wide and far-reaching, would mop up only Rs 430 crore in a year. This shows that the financial problems are too many and too big for the state government to cover.

Given the additional burden of Rs 30,000 crore due to the change in funding pattern in Centrally Sponsored Schemes (CSS) and impending pressure on the state exchequer for implementation of the Seventh Pay Commission recommendations, the government will be neck deep in trouble. The total burden on the state coffers over the next five years to fulfil poll promises is expected to be Rs 2.7 lakh crore.

It means that Bihar, one of India#39;s poorest states, is looking at a financial shock in the coming month, when the Maha Gathbandhan (Grand Alliance) government will present its first Budget. The government may impose new or increased taxes to compensate for losses and has to borrow more to fund development projects. It also means that Bihar will have to reduce spending on social services to foot the bill of other projects.

It will be nothing short of a tightrope walk for the government, said a secretary-level IAS officer about budget-making. The partial liquor ban is expected to cost us Rs 2,000-2,500 crore a year. Then, there is the issue of additional burden on the state government due to change in funding pattern in CSS. There has been a major reduction in important schemes related to child development, health, education, rural electrification, rural road and rural and urban housing. The state will have to fund these schemes. The state will have to implement the recommendations of the Seventh Pay Commission, which will further drain its resources. The implementation of the chief minister#39;s poll promises would cost at least Rs 20,000-30,000 crore in the initial year. So, Bihar#39;s financial health is bound to suffer.

Overall, 56 per cent of Bihar#39;s total revenue of Rs 1.20 lakh crore comes from central taxes and grants. Only 25 per cent comes from its own taxes. Bihar#39;s revenue receipts, although growing at a commendable rate, are not sufficient to meet the government#39;s needs in the coming years. The partial prohibition is expected to make a dent in tax revenue in the next fiscal, which is estimated to grow by 20 per cent to Rs 30,875 crore in 2015-16 (from Rs 25,662.9 crore in 2014-15). Public debt, which has doubled between FY 2012-13 (Rs 9,553.96 crore) and FY 2015-16 (Rs 17,708 crore), is expected to go up further. As the state is hovering around the ceiling imposed by the Fiscal Responsibility and Budget Management Act, 2003, it will be difficult for it to borrow more aggressively.

The central schemes earlier used to finance several development projects in Bihar, but after the cut in Centre#39;s share, Patna will now have to spend more on these projects. Despite the dire need to reduce money it spends on running itself, the state would be unable to do so because of the pending implementation of the Seventh Pay Commission recommendations. The state government will have to spend more on account of the revenue expenditure, expected to cross Rs 1 lakh crore.

The CM has already announced that the government would begin rolling out student credit cards, skill development schemes, unemployment allowances and Wi-fi in colleges and universities campus from the next fiscal year. Plus, it will also spend handsomely on road connectivity, electricity, drinking water and sanitation for all. Overall, the unofficial estimates of the first year#39;s expenditure on these schemes are around Rs 25,000-30,000 crore.

Therefore, analysts feel the government may further hike the taxes to get more resources. This is the first year of the government, so it can take some tough decisions. VAT on petroleum products, vehicles and luxury commodities might be hiked further. However, it will not be easy to increase tax rates after an extent because it is a coalition government. Therefore, it will have to look beyond tax hikes, said a senior analyst. It means it will have to cut funding where it matters the most – the social sector. The government may reduce spending on social services from Rs 38,080 crore, which it has earmarked for the current fiscal.

Education and road construction may get the lion#39;s share in the state#39;s planned outlay. Bihar has a literacy rate of 63.8 per cent against the national figure of 74 per cent. On the other hand, Bihar, home to 8.6 per cent of India#39;s population, has only 4.9 per cent of state highways.

Can Students Get a Credit Card If They Don’t Have a Job?

by Shelton on January 23rd, 2016

filed under Student Credit Cards

Many considered this practice to be predatory, as many students found themselves mired in debt that they wouldnt be able to pay back until after graduation. Then the government passed the CARD Act of 2009, prohibiting credit card issuers from offering their products on campuses, or giving away items in return for completed credit applications. In addition, the CARD Act required students and other young adults younger than 21 to show a means to repay a debt before an account could be opened.

While the CARD Act is generally seen as being successful in curbing credit card industry abuses, there are several reasons that some students may still wish to open up a new credit card account before they have a regular, full-time job. (Here are our picks for the best student credit cards.) For example, the responsible use of a credit card is an excellent way to build a students credit history and increase his or her credit score. Many students recognize that this will be an important factor after graduation when applying for non-student credit cards as well as for car loans and eventually, a mortgage. In addition, students will want to enjoy the security and convenience of using a credit card for their day to day purchases rather than relying on other methods of payment such as debit cards, cash or checks. Finally, student credit cards can offer valuable benefits such as travel insurance and purchase protection.

Here are four ways to qualify for a student credit card, without a regular job.

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1. Consider Other Forms of Income

Just because you dont yet have a regular job, it doesnt mean that you arent earning any income. Students can earn money in all sorts of ways including a part-time job, paid internships, freelance work or their colleges work-study program.

2. Co-Sign With a Family Member

If you dont have any form of income, you can open your own credit card account by having a family member co-sign. If your parents or other family members are willing to do so, opening a joint account can help build your credit while giving you access to the rewards and benefits that a student credit card offers. Some credit card issuers call this arrangement a joint account, or a co-signer or a co-applicant, but the idea is that you have an account in your name, but should you not be able to make payments, your co-signer will be responsible for that payment. Missed payments will affect both you and your co-signers credit scores.

3. Wait Until Youre 21

After students reach 21 years of age, they are able to apply for a credit card using their household income. This means that students who live with a spouse, partner or family member can count the other persons income, so long as they have access to those funds. For example, credit card applicants can include the income of a member of their household if they have hold a joint checking account.

4. Become an Authorized User on Another Persons Credit Card

Another strategy for students who wish to use a credit card is to become an authorized cardholder on another persons card. While this will not help a students credit as much as becoming a primary cardholder, it can help to improve their credit score. You can keep track of your credit scores for free every 30 days on Credit.com.

More on Credit Cards:

  • Credit.com’s Expert Credit Card Shopping Tips
  • How to Get a Credit Card With Bad Credit
  • How Secured Cards Can Help Build Credit

Image: iStock

What’s a ‘Good’ Debt?

by Shelton on December 27th, 2015

filed under Student Credit Cards

Thanks to the economic downturn and its lingering effects, the word debt predominantly carries a negative connotation. But you may have heard in the midst of balancing your budget or planning for retirement, that not all financing is created equal. In fact, some debts, experts suggest, may be good for you. But what exactly does this mean?

What Is Good Debt?

Simply put, good debt is any debt that offers a return on the investment, Rod Griffin, director of public education for credit bureau Experian, said. For instance, a mortgage is often considered good debt since in normal times, [the home associated with it] has some gain in equity, he said. Other examples of good debt can include student loans (with the return being the higher salary and improved job prospects you could command with an education) or even low-interest lines of credit you take on in order invest in stocks or retirement funds.

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What Is Bad Debt?

Bad debt, on the other hand, is debt thats going to land you in financial trouble, Griffin said. Its any credit that youre taking out or utilizing without a clear-cut plan of how to pay it back. Using a high-interest credit card to cover a shopping spree or taking out a payday loan to make extra holiday purchases are examples of bad debt.

Does My Credit Score Reward Good Debt?

Technically, no. Most credit scoring models do reward you for having a diverse portfolio of accounts and revolving debts (like credit cards) are often weighted more heavily than installment loans (like auto financing) because you determine how much credit you are going to use and pay off each month, Griffin said. But determining whether debt is good or bad is more of a financial management concept — not a credit scoring standard.

Scores don’t distinguish between what we define as good debt and bad debt, Griffin said. Instead, they look at how well youre managing all your credit lines. Making on-time payments and keeping balances low is important whether or not theres a long-term investment to recoup on the financing. You can see how your current debts are affecting your credit scores by viewing your free credit report summary each month on Credit.com.

How Can I Avoid Taking on Bad Debt?

First off, remember that you dont have to take every credit offer that comes your way, Griffin said. Instead, ask yourself before formally applying if you will be able to pay off the debt, when you will be able to pay off the debt and what you will be giving up to take on the new liability.

Look at your overall financial picture, Griffin said. If you don’t have a plan to pay something off, it’s probably a bad debt.

More on Managing Debt:

  • The Credit.com Debt Management Learning Center
  • How to Pay Off Credit Card Debt
  • 5 Tips for Consolidating Credit Card Debt

Image: Fuse

Literacy: CM wants state among top 5

by Shelton on December 25th, 2015

filed under Student Credit Cards

To fulfil one of the seven promises made by Nitish during electioneering for Bihar assembly polls of providing student credit cards for education loan of up to Rs 4 lakh, the CM asked the department to prepare a plan. He also stressed on the need to ensure presence of teachers in all the schools and check use of unfair means at all the examinations, an official said.

Your Holiday Identity Theft Checklist

by Shelton on December 24th, 2015

filed under Student Credit Cards

  • Our Credit.com Experts

    10 Ways to Save Big Bucks on Amazon.com

    by Shelton on December 23rd, 2015

    filed under Student Credit Cards

  • Our Credit.com Experts

    Apply for a Credit Card Online in 3 Easy Steps…

    by Shelton on December 20th, 2015

    filed under Student Credit Cards

    There are many different types of credit card offers to choose from including low interest, balance transfer, instant approval, cash back, frequent flyer, business, pre-paid, and even student credit cards. When determining what is the best credit card offer for you, there are many factors to consider. When you compare credit cards you should consider all of the different rates associated with each offer including the APR(Annual Percentage Rate), the Annual Fee if there is one as well as other cardholder benefits.

    A low interest credit card has either a low APR or a low introductory APR. Some interest rates are even as low as 0%. A low interest credit card can be a good choice for the individual who tends to either leave an outstanding balance on their credit card or tends to pay their bills late. A low interest credit card can help save you money by reducing your interest and finance charges.

    The best and worst student accounts

    by Shelton on October 25th, 2015

    filed under Student Credit Cards

    Banks often target students during Freshers week – but the perks being offered to lure students over are only worth a fraction of the interest theyll be hit with should they go for an expensive bank.

    So forget about free flights and free vouchers when choosing your student bank account. Instead concentrate on how cheaply you can get money out of your bank – because with college bills running into the tens of thousands, chances are you will need to borrow money at some stage.

    With this in mind, the Sunday Independent examined what the various banks have on offer for students. We found that AIB is the best bank to do your student banking with – followed closely by BoI. KBC Bank and Permanent TSB should be avoided, however.

    CHEAPEST STUDENT LOAN

    AIB: Borrow EUR10,000 for free

    AIB offers the cheapest student loan – if youre the vet or dentist of the future.

    You can borrow up to EUR10,000 interest-free from AIB over five years if youre studying medicine, dentistry, veterinary science, pharmacy, psychology, physiotherapy, radiography, law, science, mathematics, architecture or computing. As well as being tied to certain courses, these loans are only available to students in certain colleges – University College Dublin, University College Cork, NUI Galway, NUI Maynooth, University of Limerick, Trinity College Dublin, Dublin City University, Dublin Institute of Technology and the Royal College of Surgeons. As long as the loan is fully repaid within five years, you wont be charged any interest.

    BoI has two interest-free student loans. The larger loan – of up to EUR7,500 – is offered to students in their last three years of college who are studying medicine, dentistry, veterinary science, pharmacy, accountancy, IT, telecoms or engineering (non-civil). These students can borrow up to EUR2,500 a year interest-free for three years. As long as the loan is repaid within three years, no interest is charged – otherwise, the interest rate is 9.7pc.

    BoIs smaller interest-free loan – of up to EUR1,500 a year – is available to all students, regardless of discipline. It is, however, a fraction of the loans offered to the students in AIBs and BoIs preferred courses. You must repay the loan in full within a year.

    KBC, Permanent TSB and Ulster Bank dont offer interest-free loans.

    MOST EXPENSIVE STUDENT LOAN

    KBC: Costs almost EUR2,000 to borrow EUR5,000

    KBC Bank is the most expensive bank to borrow money from if you are a student. It doesnt offer any interest-free loans or overdrafts – and as it doesnt offer special student loans, students get hit with the same interest rate as anyone else who takes out a personal loan with the bank. You could pay as much as 15pc interest if getting a personal loan of less than EUR5,000 from KBC; 12pc if borrowing more than EUR20,000. Borrow EUR5,000 and youll pay EUR1,853 in interest over five years. KBC charges less interest on its personal loans if you have a current account with the bank – but at 12.8pc on personal loans of less than EUR5,000 and 9.8pc on loans above EUR20,000, that discounted rate is still expensive.

    Permanent TSB and Ulster Bank fare poorly here too. Permo doesnt offer personal loans to students – though it does offer personal loans to parents to help them fund a childs college education. Permos parental loans, however, are still the most expensive on the market.

    Ulster Bank charges 10.3pc interest on its personal loans, which makes it the second most expensive lender for students.

    Personal loans on which you dont get a good student discount are best avoided as they are expensive – regardless of the bank. A student who wants to borrow EUR10,000 from AIB for example will be hit with a 10.33pc interest rate – if hes not studying one of the courses which makes him eligible for an interest-free loan. So in this case, AIB is as expensive as Ulster Bank is for student loans – and not far behind KBC.

    CHEAPEST PARENTAL LOAN

    BoI: Costs EUR119 a year to borrow EUR3,000

    As the student contribution charge is now EUR3,000 a year, many parents have to borrow that money to get their children through college. Most banks now offer loans to parents to help them cover the cost of these fees – and other college bills. BoI offers the cheapest such loan. It charges 7.5pc interest on its college finance loan where parents can borrow up to EUR3,000 each year – over four years. That adds up to EUR119 in interest a year – or EUR476 for the four years.

    AIBs parent student finance loan, which charges 8.73pc interest, is the second-cheapest parental loan on the market. Under this loan, parents can borrow up to EUR25,000 over 12 years. Best to repay this loan early though. You would pay almost EUR15,000 in interest if you repaid EUR25,000 over 12 years – but less than EUR6,000 in interest if you repaid it over five years.

    AIB also offers a loan to students to cover the student contribution charge. That loan – of up to EUR3,000 a year for four years – has an interest rate of 8.76pc. This is much cheaper than borrowing that money through a standard personal loan – but it is still more expensive than BoIs college finance loan. Students who take out an AIB loan to cover the contribution charge can ease the blow that the repayments make to their pocket while in college by repaying the interest only on the loan. However, if you can, repay the loan in full each month rather than the interest only – otherwise, that loan will be more expensive in the long run and you will also have a large loan left to clear when you leave college.

    MOST EXPENSIVE PARENTAL LOAN

    PTSB: Costs EUR223 a year to borrow EUR3,000

    Permanent TSB offers personal loans to parents who wish to fund their childs third-level education. However, at 14.3pc interest for loans of between EUR1,500 and EUR6,999, Permo offers the most expensive loan. At this rate, it would cost EUR223 to borrow EUR3,000 over a year – thats almost twice as expensive as BoIs college finance loan. Permo charges less interest the more you borrow.

    Ulster Bank is the second most expensive for parental loans. KBC doesnt offer parental loans.

    CHEAPEST STUDENT OVERDRAFT

    Ulster Bank: Costs nothing to borrow EUR2,500

    Ulster Bank offers the cheapest overdraft – but only if youre studying the right course. You can get an interest-free overdraft of up to EUR2,500 from Ulster Bank if youre studying medicine, dentistry, law, accountancy, pharmacy, physiotherapy, veterinary science and optometry. Otherwise, you can get an interest-free overdraft of up to EUR1,500 from the bank. You must repay the overdraft within one year of finishing college.

    AIB also offers interest-free overdrafts. Students in third- and fourth-year can go into the red by up to EUR1,500 without getting hit for interest, while students in first and second year can get interest-free overdrafts of up to EUR1,000.

    BoI, KBC and Permanent TSB dont offer interest-free overdrafts so avoid going into the red if youre with one of these banks as the interest charged on overdrafts is high. Permanent TSB, for example, charges 17.7pc interest on overdrafts.

    Be careful too not to exceed the limit on an interest-free overdraft as you will be hit for interest should you do so.

    CHEAPEST CREDIT CARDS

    BoI: Costs nothing to borrow EUR850 – for the first six months

    The cheapest student credit cards are offered by BoI and AIB – but only if youre quick repaying your bill.

    BoIs student card offers six months interest-free credit on purchases – which means you can buy things with your credit card for the first six months without clocking up any interest. Youll be hit for 18.1pc interest after that so be sure to clear your bill and to stop using your credit card once the six months are up. Run up a EUR1,500 credit card bill and once interest kicks in, that bill will climb to EUR1,669 after one year. So the interest will be more than a 10th of what you borrowed. The interest charged when you use your card to withdraw cash is even steeper, at 26pc.

    AIBs student credit card is cheaper to use for the first year than a normal credit card is. Youre charged 3.83pc interest on purchases for the first year – but after that 20.3pc interest is charged.

    The credit limits (that is, the most you can borrow) on student credit cards are low. With Bank of Irelands credit card, the credit limit is EUR400 for first- or second-year students; and up to EUR850 if youre in your third year. AIBs student credit card has a credit limit of EUR600.

    MOST EXPENSIVE CREDIT CARD

    Ulster Bank: Double digit interest from Day One

    Ulster Banks student credit card doesnt offer any interest-free or discounted credit for an introductory period. You pay 17.1pc interest on purchases and 21.1pc interest on cash withdrawals once you start using your card. So avoid using this card as the interest will build up very quickly. The credit limit on Ulsters card is EUR450.

    Low credit limits work in your favour because it is best to avoid credit card borrowing as a student. A low credit limit should discourage you from borrowing too much – though you should watch out for any penalties that youre hit with should you go over that limit. These penalties can be as high as EUR8.50 a pop, depending on your bank.

    KBC and Permanent TSB dont offer student credit cards though a spokeswoman for KBC said the bank plans to launch one shortly.

    CREDIT UNIONS

    Dont overlook credit unions when borrowing money for college as they may offer much cheaper loans than your bank. A typical credit union student loan charges about 6pc interest, while the average education loan has an interest rate of 6.55pc. Interest rates vary by credit union, however.

    PERKS

    Perks shouldnt come into your decision when choosing your bank. However, its a bonus to have one – if your bank of choice happens to offer one. AIB offers a student Leap card voucher worth EUR12 – and the chance to win prizes worth EUR150. Those who take out a student credit card with AIB get the chance to win a trip for two to the Rugby World Cup next month.

    Bank of Ireland offers rewards worth EUR100 for using its student account, including ice-skating passes, surf lessons, free pizza and cinema passes. KBC offers the choice of EUR100 in cash or two free return flights from Dublin to Berlin, Liverpool, London, Amsterdam, Madrid, Paris, Milan, Frankfurt or Brussels. Permanent TSB and Ulster Bank dont offer student perks.

    As the maintenance fees on current accounts can be as high as EUR48 a year, free banking is one of the big perks of student accounts. All of the banks offer free banking to students – so students arent charged account maintenance fees. Free banking also covers standard transaction charges, such as withdrawals, lodgements and standing orders. However, there are still a lot of transactions which students are charged for – including charges for not having enough money in your account to clear a direct debit or standing order. Such charges can be as high as EUR10 a pop.

    You will also be hit for transaction fees if you use your debit or ATM card outside the eurozone. These fees can be as high as 3.5pc of the value of the transaction, depending on whether you use your card to buy something or to withdraw cash.

    MANAGING YOUR MONEY

    For many students, college is the first time they live away from home. That presents many financial challenges – not least, the rent. The average rent for a one-bed apartment in Dublin 2 is EUR1,360; the typical rent for a four-bed home in Dublin 2 is EUR2,260, according to daft.ie.

    This isnt just a Dublin problem – rents are climbing in most counties, including Kildare, Cork, Galway and Louth.

    Take a realistic approach to renting. It is usually cheaper to rent in a less-sought-after location and to either house share or rent a room in a house.

    Dont live too far out from college, however, as you will face higher commuter costs should you do so.

    Learn to budget whatever income you get. Be sure you can cover the cost of rent, bills, food, clothes, travel and social life – these expenses could clock up to EUR1,300 a month. You may need to take up part-time work to generate income. Grab any discounts you can – it is worth having a USIT card and student Leap card for this.

    Learn to cook because unless youre loaded, you cant afford to eat out all the time.

    Steer clear of expensive debt, such as credit cards or moneylender loans, as these will come back to haunt you.

    Sunday Indo Business

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