How to free up your cash flow and build your credit history with a credit card while at TAFE.
If you’re a TAFE student looking for ways to manage or improve your finances, a credit card could really help. Since you may not be eligible for a student loan or personal loan, it’s important to consider other ways of covering educational costs while establishing a good credit history for your future.
How can you pay for TAFE?
You can commonly pay for TAFE courses by installment, scholarship or by receiving a Commonwealth VET Student Loan. VET Student Loans may be accessible to you if you’re enrolled in a Diploma, Advanced Diploma or Vocational Graduate Certificate course, while FEE-HELP loans are accessible if you’re enrolling for an Associate or Bachelor degree. Depending on your eligibility, you may also be granted fee concessions or exemptions. Learn more about how to manage your student debt in Australia.
How to use a credit card to pay for TAFE costs
If you’re not eligible for a government loan, don’t despair. There are a few credit cards out there that can serve you well while you’re at TAFE.
Student credit cards
Student credit cards cater specifically for students and are generally characterised by low annual fees and low interest rates. These can be useful for easing your month-to-month cash flow since they also offer interest-free days as long as you pay off your monthly balance in full. Avoid carrying a balance on this type of credit card as you could rack up high interest fees over time.
0% purchase credit cards
These are credit cards that offer 0% interest rates on your purchases for a promotional period. This means that you could use the card to pay for TAFE fees or study supplies and you can pay it off without any additional interest costs for an introductory period (usually between 3 to 18 months). At the end of the promo period, the card’s revert purchase interest rate will apply to any remaining balances. Aim to repay the entire balance before the revert rate kicks in to avoid high interest costs and potential credit card debt.
0% balance transfer credit card
0% balance transfer credit cards can be very useful if you already carry existing debt. These cards let you transfer debts over to your new credit card and offer a 0% interest period on that transferred balance. The promotional period will vary between products, but these can sometimes vary between 12 to 24 months interest free. At the end of the promo period, a higher revert rate (usually the standard purchase or cash advance rate) will apply to any remaining balances.
Before applying for this type of card, consider any balance transfer fees or card costs that may offset your interest savings. Similar to a 0% purchase credit card, you should calculate whether you can successfully repay your debt within the promotional period before you apply.
Low rate and low fee cards
Low interest rate credit cards and no annual fee credit cards are two other card categories you can consider. The idea is to keep interest fees low and minimise card fees as much as possible. With any type of credit card, however, make sure you regularly check your transactions and balance and aim to make full repayments each statement period to avoid incurring interest fees.
How a credit card can help build your credit history
If you haven’t owned a credit card before, getting one can help build your credit history. This can improve your chances of approval when applying for future loans. To establish a good credit score, you should always pay your credit card bills on time and aim to pay it off in full. If this proves too hard, a balance transfer credit card can offer short-term respite from interest charges by transferring your credit card debt onto a new card. Learn how a balance transfer affects your credit rating.
Compare credit cards for TAFE students
Why choose a credit card over a personal loan?
If you’re not eligible for a student loan, you may be weighing up between a credit card or personal loan.
Some of the major advantages of a credit card over personal loans include the ability to access cash in an emergency, access to interest-free days on your purchases, and other card features like purchase protection, merchant offers and rewards. The drawbacks of using a credit card are typically higher interest rates, but you can avoid these with a 0% interest offer or by paying off your balance in full each month. Of course, the greatest pitfall of having a credit card would be the temptation to overspend and fall into debt. The next section will provide tips on how to avoid this.
How to manage your new credit card in three steps
It is important to avoid creating unmanageable debt, especially since you’re trying to build a good credit report. Follow these tips to manage your credit card well:
- Make timely repayments. Making repayments on time does more than benefiting your credit report. It will also help you avoid interest costs. A smart way to be disciplined about this is to set periodic alarms and reminders to make your repayment. You can also set up an automatic monthly transfer from your bank account to your credit card account to ensure you never miss a credit card bill.
- Pay more than the minimum repayment. Each month, you’ll be required to make a minimum repayment of between 2% and 10% of your balance. The amount will vary between banks, but you’ll avoid late payment fees if you make the minimum repayment. However, only paying the minimum repayment means that the large majority of your balance remains and grows with interest. Instead, you should aim to pay your balance in full or at least pay as much as you can each statement period. Otherwise, your debt will grow steadily and you could lose hundreds or thousands of dollars to interest costs over time.
- Stick to a budget. If you don’t already have one, create a budget. Following a budget can help you stay in control of your expenses and facilitate monthly savings. Sticking to a budget will also help you avoid any nasty surprises when you go to pay your credit card bill. You can use our guide on how to set and manage a budget for some tips on how to get started.
How to apply for a credit card if you’re a TAFE student
Depending on which credit card you want, there might be specific requirements and eligibility criteria to meet. Generally, you must be at least 18 to apply, and an Australian citizen or resident, but some cards make exceptions. Some cards also require a minimum annual income, which you may not meet unless you’re already working.
You will also need to provide necessary information in your application, including personal details and details of any monthly income or expenses. Check out our credit card application tips for more information on how to improve your chances of approval.
A credit card may be handy for settling those course fees and student expenses in the short term, but always be cautious when managing any line of credit. It’s important to research, compare and weigh up all your options before deciding if a credit card is the right choice for you.
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