Here is a brief tutorial which will give you a complete overview of the process for applying for credit cards and getting approved for one.
1. What is a Credit Card?A
credit card is a system of
payment named after the small
plastic card issued to users of the system. A credit card is different from a
debit card in that it does not remove money from the user's account after every transaction. In the case of credit cards, the issuer lends
money to the
consumer (or the user). [1]
2. Why do I need a credit card?A credit card is the single most authentic proof of your credit worthiness. It means that financial institutions are willing to lend loans/credit to you. Depending upon how much you earn, financial institutions would be happy to lend loans to you. So the better your credit rating, the more loans you can get. Every time you are approved for a credit product like a bank loan or a credit card, your credit rating improves which will help you in securing more credit products in the future.
Apart from improving your credit rating, having a credit card will help you in paying your tuition fees. You can try to save as much cash as you want and the rest you can pay with your credit card.
3. Ok be quick and tell me how to get a credit card?Ok smart ass, here is how you get a credit card. Before you apply for a credit card, it would be better to have some pre-requisites fulfilled.
1. Get an Australian driving license. It doesn't matter even it is a restricted learner's licence. But getting a full license has its own benefits. Check my post about
driving licenses. An Australian driving license is your main identity document and will be used every where for identification purposes. The sooner you get it, the better it is.
2. Once you have an Australian driving license, the next step is to have an entry made in your Australian Credit file to start a credit score. What is an Australian Credit File and what is a credit score? A
credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the
creditworthiness of that person, which is the likelihood that the person will pay his or her debts in a timely manner. Your credit file is held by a private owned company in Australia. You can check this
website for more details.
Any way, you want to start your credit file in Australia and want the first entry to be entered into it.
The best way would be to go and buy a mobile phone connection from a cellular service provider.
There are different cellular service providers in Australia.
Three,
Optus,
Vodafone,
Soul and a few others.
So when you sign up for a post-paid connection to any cellular service, an entry would be made into your credit file saying that you have been given credit worth $X by company X. That entry would be used by others to approve or disprove you for a credit product.
Please remember that you must buy a Post Paid connection because a pre-paid connection is not a credit product. Any product for which you pay afterwards has been lent to you by credit, until you pay back the credit amount in full.
3. So now you have made an entry in your credit file by buying a post paid cellular service connection. The next step is to get yourself a job. Every time you get paid, your employer issues you a pay slip. Keep those pay slips at a safe place. Most employers would pay you by transferring your pay into your nominated bank account. After you have been working at your job for lets say four months, it would be the right time to apply for a credit card.
4. Which credit card to apply for?There are numerous credit card companies which offer credit cards. The best financial institution to apply for a credit card would be the bank where you have been receiving your pay for the past four months. The reason being that your bank knows that you have been receiving your pay in your bank account. Financial institutions are interested in knowing whether you are employed or not. Banks are willing to give credit cards to people with stable employment history. Even if you have $20,000 in your account, banks would be reluctant to give you a credit card. But if you have a $400 steady source of weekly income, every one would be happy to give you a credit card with a limit of $1000 or more.
So if you apply for a credit card in your own bank, which knows that you have been employed and you have been receiving your pays in their your bank account, they would be happy to give you a credit card without much hassle. You can tell them that you are an international student and you would like to have a credit limit of $500. Dont worry, I will let you know later on how to get credit cards of greater credit limits.
5. Hopefully, if you have been paying close attention to what I have been saying and followed what I have said, you would be approved for a credit card by your banking institution. Use this credit card and NEVER EVER, forget to pay your monthly credit card fees/dues if any. Normally if you dont use the card, you wont have to pay anything. But it is good to use the card and quickly pay it back before the 55 days interest free period expires.
Now after six months of your first credit card being approved, it is time to apply for another credit card. This would be the same time when your tuition fees would be due. So try to time your credit card approvals with your tuition fees due dates.
So if you can keep on getting approved for a credit card every time you have to pay your tuition fees, you would significantly reduce the burden on yourself of making lump sum upfront cash payment.
Make sure, that if you get rejected for a credit card, DONT apply for another one immediately. Wait for three or four months. If you apply randomly, one after the other for credit cards, your credit rating would go down and no one would be willing to give you any credit products.
6. Ok, thats fine but I have to pay back all this money? Where do I get that from?Yes, you have to pay back your credit card. But its up to you when you pay them. For every $5000 you have to pay a minimum of $100 per month. So its up to you if you want to keep on making the minimum payments or you want to pay off your credit card at once.
Credit card companies are normally not interested in your paying back what you have borrowed. They are interested in a situation where you keep on paying the interest on the unpaid amount. As long as you keep on paying the minimum monthly amount, the company would be happy and would give you credit limit increases as well which can come in handy when its time to pay your tuition fees.
7. What if I cannot get a credit card?Dont worry if you cannot get one. These days most banks offer some thing called a debit card which is a credit card linked to your bank account. So when ever you use the card, funds are deducted from your bank account. This card acts like a credit card and in situations where merchants only accept credit cards, this card can come in handy. You can use this card as a credit card or a debit card.
