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According to a BMO Mosaik MasterCard Student Survey, 77 per cent of post-secondary students have a credit card. The reasons are varied, but more than 65 per cent of those surveyed indicated they carry a credit card to help with emergencies; 45 per cent carry one to help manage school expenses; and 33 per cent obtained a credit card for travel purposes.
However, the survey also found 72 per cent of those surveyed did not know how long a credit rating, good or bad, stays with them; in fact, many did not fully understand that a poor credit history can impact their ability to borrow in the future.
BMO’s advice to parents: Arm your children with an education on how to use a credit card wisely and responsibly before you or they sign on the dotted line and start spending.
Mike Kitchen, Vice President, BMO Mosaik MasterCard, emphasized that students need to understand the importance of establishing and maintaining a good credit history. For example, one in four students surveyed did not understand that their credit history could affect the future purchase of a house, and 61 per cent did not know it could affect future employment opportunities.
Kitchen noted that a credit card can help students manage expenses while away from home, but cautions that the convenience of readily available credit also comes with responsibilities.
Kitchen offered the following tips for new credit card users:
The Mosaik MasterCard Student Survey was conducted by Ipsos-Reid from August 11 to August 17, 2005. For the survey, a representative randomly selected sample of 1,008 Canadian college/university students 18 years of age or older was interviewed online. With a sample of this size, the results are considered accurate to within ± 3.1 percentage points, 19 times out of 20. These data were weighted to ensure the sample's regional and age/sex composition reflects that of the actual Canadian population according to the 2001 Census data.- Learn to Budget: If you’ve never created a budget before, ask your bank for help on how to get started. Tools like the Student Budget Calculator on bmo.com can help you understand how much you can afford to charge and pay back.
- Only pay for what you use: Credit card features and benefits are not free – they’re incorporated into the annual card fee. Find a card that lets you choose the interest rate, features and rewards you want, so that you’re not paying for options you don’t use.
- Pay, at least, the minimum: At the very least, always make your minimum monthly payments on time. This will help to establish a good credit rating, which is very important, especially when you enter the job market or are looking to buy your first car. A record of missed payments can sour your rating and take between two to seven years to clear.
- Stick with one credit card: It is easier to pay one bill at the end of each month and easier to keep track of spending.
- Report a lost or stolen card immediately: Keep a copy of the credit card number and the financial institution's name and telephone number in a secure place.
- Protect personal information: Don’t share your credit card with friends. Unless you make a telephone or online purchase with a reputable merchant, your credit card number should not be revealed to anyone.
- Read everything that comes with the card: Be sure you understand all the terms and conditions, including how interest is calculated, and when payments are due.
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