How to avoid racking up personal debt as an international student

05 Mar 2019

While student loan debt is inevitable in many cases, there are other forms of debt that international students can easily avoid.

It may be difficult to manage your personal finances initially. Many international students are leaving home for the first time and having to manage a large amount of funds they aren’t at all used to handling.

How do you avoid falling into traps and racking up a huge amount of personal debt during your time abroad? Here are some tips:

Choose bank credit cards wisely

My roommate in my sublease this summer is an international student from France and I asked him what stereotypical American thing he hasn’t done yet and he answered “get a credit card and use a lot of money I don’t have” and that there is poetry

— Ursula Perano (@UrsulaPerano) July 13, 2018

In countries where your credit score is important like the US, you may be advised to get a credit card to ‘build your credit’.

However, while building your credit is important for getting loans later on, it can just as easily damage your credit score if you don’t make payments on time.

If you plan on getting a credit card for the sole reason of building up your credit, compare cards from different banks to determine which has the lowest interest rate, annual fee waivers and so on.

Once you get it, create an automatic payment for the minimum due each month so it won’t affect your credit score. Use your credit card only to make payments for daily purchases (groceries, books, toiletries), or for bill payments like your mobile phone plan, that you know you can pay off as soon as possible.

As tempting as it might be, do not use your credit card to pay for items that are out of your budget, or you’ll likely find yourself deep in debt before you know it.

Don’t apply for store cards

You don’t need store cards – especially if you already have a credit card. Source: Shutterstock

What are store cards? They are credit cards you receive from a specific store or chain instead of a bank, such as Boots, Kohl’s or Victoria’s Secret.

Retail assistants can be very pushy when it comes to getting you to apply for one, as they earn commission from getting people to sign up.

They might offer additional discounts when using the card in order to convince you to ‘save money’. But you’ll likely end up spending more than you intended to in the first place. Don’t fall for it!

Most of the time, store cards offer higher interest rates than banks. Even though you think you have the discipline to pay it off every month and avoid the interest, it’s wiser for international students to avoid them altogether, especially if you already have a credit card.

Beware of recurring subscriptions

Do you really need a Netflix AND Hulu subscription? Before you sign yourself up for too many recurring subscriptions, ask yourself which ones you will really need and use.

While there are useful ones like Amazon Prime where students can save money on books and supplies, subscribing for too many memberships may put your whole budget out of whack as they pile up, leaving you in debt when you can’t afford to make the payments.

Those ‘free trials’ seem tempting too, but unless you’re vigilant about cancellation dates, you could easily forget and end up bound to a contract for six months to a year.

Plus, not keeping a close eye on your bank statement may lead you to become a victim of ‘zombie memberships‘, which are memberships that continue to live on and charge you even after you’ve cancelled them.

Avoid falling into these subscription and membership traps by only signing up for what you really need. For example, you don’t need a gym membership as you can use your host university’s gym facilities (you’ve most likely already paid for it in your student fees anyway!).

Don’t put everything under your name

Share the responsibility of paying utility bills with your roommates. Source: Shutterstock

Unless you’re living alone, it’s best not to have all the utility bills under your name. For example, if you live with a roommate and you split the cost of electricity and internet, make sure that both of you share equal responsibility when it comes to registering for utilities.

The reason for this is that in the unfortunate event of your roommate skipping out on paying bills, leaving you high and dry, you won’t be solely responsible for the late payments. Missing payments can damage your credit rating and make it harder for you to register for utilities later on.

If your roommates have some share of the responsibility, they’ll be less likely to avoid paying for them. Utility and rent providers don’t usually care who hasn’t paid for their share – they are only concerned about receiving the full amount, so don’t have everything fall under your name!

Stick to your budget

At the beginning of each semester, set up a budget plan so you can determine early on how much you can afford for groceries, expenses, personal items, school supplies and such.

Stick to this plan so you don’t end up spending more than you can afford, or putting more payments on a credit card that you can’t afford to pay off later on.

This is a fool-proof way to ensure you are spending within your means and not racking up unnecessary debt.