Friends, this article is an interaction with those students who want to get a good credit card for themselves because in this article, I am not going to tell you about any Best Credit Cards for Students, rather I am going to discuss you about the importance of Financial Literacy for Students. We are going to know about the importance of financial literacy for those students who are currently 18 years old, 19 years old or 20 years old, that is, those who are not earning yet but are pursuing their studies.

Today, based on our personal experience, we will tell you how this banking system works, what is CIBIL Score and will a student get a credit card? Therefore, it is my request to everyone, especially the students, to read this article completely once because in this article we will try to provide you complete value about financial literacy.

Contents:

Guidance to build strong financial literacy for students about credit cards:

What is the CIBIL score of a person without credit history?

Now everyone knows that CIBIL score is a three digit numeric summary of your credit history which ranges between 300 to 900. Now if you are a student and have never taken any loan from anywhere in your life, then how much will be your CIBIL score? Now since you have not done any kind of transaction with the bank till date (here we are talking about credit or loan related transactions) then in that case your CIBIL score is -1. In banking terms it is called -1.

Now here -1 does not mean that your CIBIL score is very bad but it is a tag which represents that this is a customer whose CIBIL score is neither bad nor good because he never took any loan from the bank.

How Does CIBIL Score Work?

The full name of CIBIL is TransUnion CIBIL. Now TransUnion CIBIL tells all the banks in India that you will send me the updated data of all your customers every 30 to 45 days. And within these 30 to 45 days, the CIBIL score of every customer is updated. Now let us know how it is updated. Now, if you have not yet had any loan related transaction with the bank, then your CIBIL score is also getting updated by -1 every time.

Start Building Your CIBIL Score:

Now if you are a student and your CIBIL score is -1, then you will have to update it to between 300 and 900 because only then you will be eligible for a loan or credit card. Now this is where you need guidance the most because this part of life is very important for students and everyone who is just starting to make their CIBIL score.

Now the internet is filled with so many articles and videos which say that ‘Are these cards good for students or will students get more benefits in these cards’. Now when a student starts preparing his CIBIL score, that time is very important for him and at that time he needs the right guidance and he also knows how difficult it is to get a credit card without CIBIL score.

Now, if you apply for 10 credit cards a day after watching such articles and videos and 10 out of 10 get rejected, then it has a very negative effect on your CIBIL score due to which instead of improving your CIBIL score, it can get worse. And the bank calls it Eager for Credit that is, you are hungry for the credit card. We will also tell you further what is the importance of CIBIL score in your life?

Let us now know how if you are a student, then how can you start making your CIBIL score –

Now the CIBIL score is a mixer of secured and unsecured loans. Now let us understand secured and unsecured loans in short –

Secured Loan – Secured loan is a loan in return for which you pledge something of yours to the bank. All loans like car loan, gold loan etc. come under secured loan.

Unsecured Loan – Unsecured loan is the exact opposite of secured loan, i.e. it is the loan in return for which you do not pledge any of your property with the bank. All loans like personal loan, business loan come in the category of unsecured loan. Your credit card is also included in the category of unsecured loan because in return you do not pledge anything of yours to the bank.

Now whether you take a secured loan or an unsecured loan, the report of both your types of loans will be sent to TransUnion. Your initial aim should be to raise your CIBIL score from -1 to a good number in the range of 300 to 900. For this you can follow some practical steps which are mentioned below –

First of all, get a FD (Fixed Deposit) of ₹ 10000 in the bank in which you have an account. Here I would like to tell the students that they should not get into the trap of spending too much in the beginning, an FD of ₹ 10000 is enough in the beginning. Because it is easy to get credit cards but it is difficult to manage them and especially if you have multiple credit cards then it can prove to be very dangerous for you.
Now get a credit card issued from your bank against this FD. Now it depends on your bank whether it issues you a credit card with 80%, 90% or whatever limit of this FD. But whatever limit your bank gives you, take it. In the beginning, you should not be in too much hurry that is why we want to tell you how important Financial Literacy is for students.
Now, here we take the example of ICICI Bank which gives you a credit card with 90% limit of your FD. Now if you get an FD of ₹10000, then at the rate of 90% you get a credit card with a limit of ₹9000. Now you do not have to apply for any more credit card for the next 6 months. You just have to use this credit card for 6 months. Just like you spent ₹ 2000 from this credit card in a month and paid it on time, spent ₹ 3000 and paid it on time, similarly you have to make small transactions from this credit card and pay them timely.
If you continue to use only this credit card in this manner for the next 6 months, your CIBIL score will increase from -1 to somewhere between 700 to 750 in the range of 300 to 900. Now even after this you do not have to show any hurry nor do you have to apply for any credit card.
Now after 6 months, when your CIBIL score is updated, then you have to use services like Paytm Postpaid, Flipkart Postpaid and Amazon Postpaid. You have to raise the limit of ₹5000 to ₹10000 in any one of these postpaid and spend it little by little and pay it timely. This postpaid also works like a credit card, in this also you get some limit which you can use.
- Always keep in mind that no matter which credit card you have, unless it is very important, you should always use only 30% to 40% of its limit, this keeps your CIBIL score at its best.
Now when you start using these postpaid, in a way, a second loan starts on you and you are paying it on time. This will further improve your CIBIL score. You should also operate this second loan regularly for at least 6 months. Now that you are running both a secured and unsecured loan simultaneously and are paying them on time, this sends a good signal to the bank for you.
Now after this you can apply for a credit because your CIBIL score has now been generated and that too at a good number. But you still don’t have to show credit card appetite. Initially you have to apply for only a few selected credit cards. We will tell you the names of some credit cards further, try to take one of these cards in the beginning, because right now you are in the starting phase and you are still building your CIBIL score.

What Is Add-On Credit Card:

Add-on credit cards are supplementary credit cards issued in addition to a primary credit card, providing users with a secondary or supplementary card.

Now suppose there is a father who has a credit card with a limit of ₹ 50,000 and he wants to issue a credit card for his child who does not yet have a credit card or credit history. So he can go to the bank and get an add-on credit card issued against his credit card for his children. Now, the limit of this add-on credit card is determined by all the banks according to their rules but generally it is the same as the primary card.

Now its biggest advantage is that if you are a student and you do not have a credit card yet and you have to do credit card transactions from time to time, then it will be very useful for you. All payments of this add-on credit card will be made through the primary card holder only and if for some reason any payment gets delayed, it will not have any impact on your CIBIL score.

Importance of CIBIL Score in Your Life:

Most of the youngsters and students are not very serious about their CIBIL score and in the future they get bad results from it. They do not give much importance to the CIBIL score and knowingly or unknowingly spoil it more than necessary. Here we would like to tell those youngsters and students that you should not take CIBIL score so lightly because it decides your entire financial life. We believe that children have a fickle mind and in the beginning they are not able to see their life far ahead but at least they should be a little aware about their financial literacy.

If you believe that ‘a low CIBIL score is unimportant, and loans are unnecessary in life’, then this mindset can bring challenging times in your future. Now suppose you get a good salary job in your life in which you earn two-three lakh rupees per month or you start running your own business in which you earn good money, at that time, if you want an expensive house, then you may not be able to pay that much money at once and you will need a home loan at that time, then you will realize the importance of this CIBIL score.

Or if you want to setup your own business and require a business loan from the bank, then your CIBIL score is still useful for you and if your CIBIL score is bad then you will not be given any kind of loan from the bank.

Therefore, never judge CIBIL score from your current life. Now, if for some reason you do not get a credit card even after following these steps which I have told you in this article, then you should stop there at that time, do not apply for cards again and again in different banks. There you tell yourself that I will take a credit card when I start earning, then I will get the credit card issued by showing my salary slip to the bank. Because it is best for you to wait at that time.

Best Credit Cards for Students:

Now in the rest of this article, let us discuss some good credit cards for students. Now since you are a student and you get limited pocket money, then you should apply only those credit cards which are lifetime free. Today, two such credit cards are famous –

ICICI Platinum Credit Card
Kotak Dream Different Credit Card

Here we have mentioned only two credit cards but you will find many lists of best credit cards for students on the internet. But before applying for any of those credit cards, you must follow all the steps mentioned in this article once and only then apply for any credit card. Because you can choose the credit card as per your requirement but what things you have to keep in mind before taking a credit card and what things you should be aware of are more important and we have told about this in this article. If you find this information helpful then do share it.

The Importance of Financial Literacy for Students: Understanding Credit Cards