Getting a degree is a major investment that can feel like a never-ending series of expenses. Along with tuition fees and living costs are essential educational supplies that are not necessarily covered by traditional student loans, such as a MacBook or other decent laptop. A new MacBook starts at well over $1,000, and unless a student has that kind of cash on hand (and very few do), some form of financing is needed. A credit card might be a student's first thought when he or she needs to buy a MacBook, but it's not the only option, and in fact is almost always the worst one. Here's why:
Don't assume that students always get approved for a credit card. Traditional forms of financing, including credit cards, are not designed for a student's situation, as approval depends on proof of regular income and a good credit history. These financial indicators are not geared toward full-time students who often are unemployed. Plus, young students rarely have an established credit history. International students face a particular challenge because they don't have a social security number, which is one of the first things a credit card application asks for.
So, rather than getting immediate approval for a credit card, a student has a good chance of being declined, or if approved, getting a credit card with a high interest rate and annual fee. None of these outcomes are favorable when it comes to purchasing a MacBook.
Financial experts say credit cards are only a good option for cardholders who pay them off in full within a month, thus avoiding interest charges on the balance. If a student could cover the full cost of a MacBook within a month they probably wouldn't need financing in the first place, so this immediately eliminates credit cards as a sensible option.
A student who charges the $1,300-plus cost of a MacBook to a credit card and doesn't pay it off within a month is left with the balance plus double-digit interest rate charges that add up every single month. Take for example a cardholder with a 32% APR who charges $1,300 to the card and pays a monthly minimum of $57. It will take that student 36 months to pay off the balance, which will ultimately add up to over $2,000.
As only a minimum monthly payment is required, it's very easy for a student to never reduce the balance on a credit card. Over time the situation only gets worse, and the total cost of that MacBook ends up being considerably more than the initial price. Carrying a credit card balance for an extended time - it could be years or even decades - has a negative impact on a student's credit score, which effects his or her financial standing long after graduation.
A much better alternative to credit cards for a student who needs to buy a MacBook is a personal loan from Boro. First, Boro looks beyond traditional financial indicators to an applicant's education background and earning potential, and allows international students to get financing by not requiring a social security number or credit history. Secondly, borrowers set up a schedule for automated monthly payments at the same time as signing the loan agreement. This means there's an end date in sight from the day you buy your MacBook, the low interest rate is locked in and monthly payments never fluctuate. A further benefit is that establishing a history of timely monthly payments helps increase a student's credit score over time, putting him or her in a solid financial position upon graduation and beyond.