The 9 biggest financial mistakes you can make as a student
1. Not being aware of your credit score
Whether you realise it or not - you have a credit score. It’s THE most important thing to be aware of, because everything you do financially (what you spend, how you spend, paying bills) affect it.
If you want a phone contract, overdraft, credit card, mortgage etc, the lender will look at your credit score to see if you can afford it/pay your bills. After you leave university and are looking to get a better bank account and later on even a mortgage, your credit rating is everything. If you messed up while at university (didn’t pay bills etc), you may have a poor rating and will need to spend a lot of time trying to improve it.
Just being aware of this (many don’t realise!), can help you avoid trashing your credit score by making uninformed poor decisions.
A bad decision will remain on your credit history for six years so face up to it and find out what your score is. We like CreditExpert: credit reports, which do free trials and give you loads of tips on how to improve your rating.
2) Not understanding credit cards
Getting a credit card too soon (when you have no income) is really not a good idea. Because you are young, you haven’t really had time to establish good credit, so the interest rates for you are astronomical, not to mention all the hidden fees.
The big mistakes you can make include:
Only making minimum payments - This is a horrible debt trap where you only pay off interest and never the actual debt. The Money Charity found that the average household has a credit card debt of £2,292, and the average rate of interest on a credit card is 17.91% APR. It found that by only just making the card’s minimum payment, you’ll end up taking 25 years and three months to repay the card. However, if you paid the contractual minimum payment in the first month and then kept paying that amount, you’d be clear of the debt in 5 years and three months - twenty years sooner.
Not paying or not paying on time - You may not realise it, but not paying your bills on time can have a negative impact on your financial future. It will impact your credit score, as well as you possibly being stuck with expensive late payment fees.
If you don’t pay your credit card bill, you could find that pretty quickly the credit card companies turn to debt collection agencies to get whatever money back they can - this means lots of charges on top. It’s a terrible cycle to get yourself into, so avoid it if you can.
Increasing limit - It’s really not wise to have a credit card without an income, but you’ll soon find that whether you’re doing well with it, or handling it really badly - the credit card companies will probably increase your limit (without your requesting it). The truth is, they make money from the interest you are paying and the more debt you can’t pay back, the more money from interest they’ll make. You can ring up your credit card provider and ask it to be reduced again, which is easy to do.
3) Not using your student discounts
Until you’re a pensioner, you’re never going to be able to get the discounts you can get now, so make the most of it.
Whether you have an NUS card or not, ALWAYS ASK FOR STUDENT DISCOUNT. Flash that card whenever you can - wear it as a badge if you must. Don’t presume that because there is no advert saying there’s a discount, that there isn’t a discount. Just ask.
If there isn’t a standard discount, now is the chance to get negotiating - you’ve got the ace! Ok, so maybe they won’t give you a percentage off that laptop, but they may throw in some fancy anti-virus or a case. If you don’t ask, you don’t get.
Another really important thing, is to start getting bargains - don’t buy things that aren’t discounted and really make the most of freebies. Studentmoneysaver have the best deals, and articles to ensure you save money.
4) Not having a budget
You know, students are skint - it’s a thing. And it’s REALLY hard to start budgeting when you have very little money.
But having a budget and sticking to it is so important. If you’re just spending and you don’t realise how much is coming in and going out, you’re going to find yourself in a bad financial situation. If you stick to a budget, you can avoid taking out loans.
If you’re using student loans to pay for everything and have no income, you’re going to have to make sure you stretch it out for the entire year.
Think about what income you have: savings, student loan, money from family, birthdays etc. Then consider your essential costs: rent, bills, food. Whatever you have left, which probably isn’t that much, you can use on luxuries, like coffee, clubbing and holidays.
5) Going over your overdraft
Do not go over your overdraft (from arranged overdraft to unarranged) as you’ll be charged a fortune in fees. Some banks are decent and will give you a small buffer as well as a heads up that you’re near your overdraft. But as soon as you go over by a penny, you’re going to to get a hefty daily fee along with interest.
Remember, when paying for things on your card, don’t presume that the money goes out instantly - it can take weeks, which means you really need to be thinking about (and budgeting) what you are spending to not make that mistake.
6) Not signing up to funding schemes
Depending on your circumstances, there are a variety of student grants and bursaries you can apply for. The good thing about these is, unlike loans, a lot of them don’t need to be paid back.
Although it might seem like free money, you’ll have to put up a case as to why you qualify for the bursary or grant. You have maintenance grants, special support grants, travel grants, disabled Students’ Allowances, NHS bursary, grant and funding, teaching grants, and Access to Learning Funds.
You’ve also got bursaries, scholarships and awards - these are handed out by universities and educational trusts - because they want a certain type of person at that uni - and that person could be you.
7) Getting a payday loan
Don’t do it - just don’t. We know you’re skint and it’s so temping, but don’t go near them. With a 782% representative APR loan - which are aimed at students (we’re not even going to name the company), you’re asking for some serious trouble if you get involved in this kind of loan.
First off, it is very likely that getting a payday loan is going to hurt your credit rating. Lenders see that you have gone to them in the past and that you aren’t good with money. Even if you aren’t thinking that far ahead, because of the crippling interest rates, you’re likely to find yourself in a payday loan cycle - you’ll borrow to pay back and on and on.
If you’re considering getting a loan out - stop - and apply learning fund first. It’s run by universities and helps students struggling to pay for their studies. It’s based on your individual financial situation.
You can also make money - guess what, we have 99 ways for you to do that.
8) Not protecting your financial information
You’ve probably met them - the students too lazy to go to the shop, so will write down their PIN so someone else can go instead? Or those who are happy enough logging onto banks via public wifi or public computers.
The truth is, it’s easy to let your guard down at uni, but there are people out there more than happy to take advantage of it. Be very suspicious of emails, texts, or phone calls (there’s a pigeon in your bank account), which want your PIN number or account details. Make them prove that they are who they are saying - even if it means you hang up, go to the official website and say you’ll call them from a number written on the site.
When you’re at university, you’ll probably move every year/couple of years. Really make the effort to let all the organisations who send you post (especially banks) know your new address. You don’t want financial information being sent to a load of strangers.
9) Letting friends pressure you into spending loads of money
Don’t try and keep up with your peers. You’re going to meet people from different backgrounds who may have plenty of cash who can afford to go skiing in the easter holidays. If you can’t - don’t do it. There is plenty of time to do this.
You need to learn to say no. University is expensive - there’s always a night out, party, holiday, awesome experience that costs a load of money. If it’s not within your budget, don’t do it. There are a million fun things to do at uni without getting yourself into a load of financial trouble.
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