Look at the fees.
- Unarranged overdrafts and credit cards will often have fees associated with their use. For overdrafts, these might be daily or monthly fees and charges. For credit cards, there may be yearly or monthly fees. To win any game, you have to first read the rules. The same works for borrowing. To be able to come out of university in a healthy financial situation, play the game – read the small print!
Look at the APR (Annual Percentage Rate).
- APR is a charge for borrowing, the interest paid on credit so it will be added to the amount of money you borrow. You want this to be as low as possible so you pay as little as possible back. The average APR for credit cards is around 20% meaning if you borrow £1000 at 20% APR and don’t pay it back for a year you would owe £1200.
Be wary of ‘on finance’ schemes.
- Buy now and pay later, perhaps even in instalments, can be super tempting. This is known as buying goods ‘on finance’, a loan is offered in store or online so an item can be bought without a credit card or cash. Typically, a set period of time is agreed to pay the item off but since it is a type of loan, APR may be charged on top of the price of the item. Be wary, as buying too many things in this way can lead to struggling over debt. Also, keep in mind this reason Klarna – the instalment paying programme – is so popular with retailers. It drives up their sales by xxx%
Complete this short summary quiz before continuing on to the next tip!