Topic research student credit cards, evaluate its limitations and propose ideas: solutions to innovate the product

For students, credit cards not only support spending needs but also provide an early opportunity to experience personal financial management.. This essay explains why student credit card

THE STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH UNIVERSITY OF BANKING

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ot er

HOCHIMINH

UNIVERSITY OF BANKING

Essay subject: Banking Operations

Topic: RESEARCH STUDENT CREDIT CARDS, EVALUATE ITS LIMITATIONS AND PROPOSE IDEAS/ SOLUTIONS TO INNOVATE

THE PRODUCT

Class: BAF301_2411_ 10 TA02

Student name : Đỗ Mai Trang Student [D : 050610220625

Lecturer : Lê Đỉnh Hạc

Ho Chỉ Minh City, November 2024

TABLE OF CONTENTS

1 Definition and Eeatures of Student Credit Card . << =<e<=<ee

2 Benefits of Student Credit Cards

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d Emergency SUppOF c2 c1 1n vn vn n2 1n Hư

3 Challenges and Risks of Using Student Credit Cards .«< << H00 e

b High Fees and Interest Ñafes 2 2 222122112212 11 181tr

c Low Fmancial Management ÀwWarenes§§ - c c2 n 2 n2 tre

a FImanctal EducaHiØn - - - 1211211511111 5315151121111 1111 11 81 11 11 111g Hy

b Spending Management Tools - + 212122322113 5212151151251 rkg

c Enhanced Support and AdVIC€ L- L0 20 1212222122112 11H ng na d._ Improved Fee PolIcles c2 2212221121121 1215181118115 E1 E1 Hy na

e _ Early Payment ÏncenfIV€S 2 12 12.1 1 TH

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L Introduction

In the digital financial era, credit cards have become an indispensable tool, enabling users to spend flexibly and manage their finances For students, credit cards not only support spending needs but also provide an early opportunity to experience personal financial management This essay explains why student credit cards are an important product that helps students develop an awareness of personal financial management

H Main Content

1 Definition and Features of Student Credit Cards

A student credit card is a special type of credit card that banks design specifically for student customers, making it easier for them to access financial services Unlike regular credit cards, student cards generally have a lower credit limit, low or waived annual fees, and suitable incentives

Example:

e The Sacombank Student Credit Card has a limit of 3-5 million VND, waives the annual fee for the first year, and offers a 0.5% cashback on spending

e The Vietcombank Visa Student Card has an annual fee of around 100,000 VND,

a much lower rate compared to regular credit cards

2 Benefits of Student Credit Cards

a Convenience

Credit cards provide convenience for students by allowing them to spend now and pay later—a notable benefit when they do not yet have a stable income or full financial independence With this temporary “borrowing” option, credit cards enable students to spend flexibly without needing immediate cash This 1s especially helpful when students need to buy books, pay tuition, or cover other unexpected expenses Certain credit cards offer interest-free periods of up to 45 days, meaning students don’t incur interest if they pay off the balance before the end of the interest-free period For example, the VPBank Student Card allows a 45-day grace period on purchases, giving students time to arrange their finances without additional interest charges This grace period enables students to plan repayments without worrying about incurring interest if they pay on time

b Attractive Incentives

Student credit cards often come with appealing incentives tailored to students' needs and preferences Some cards not only waive the annual fee for the first year but also offer cashback, rewards points, or special discounts at places students frequently visit, like bookstores, convenience stores, and coffee shops

Example: The HSBC Student Card offers discounts at certain convenience stores, bookstores, and eateries, helping students save money on their spending With cashback

or reward programs, students can receive a portion of their spending back, helping them save on costs and encouraging responsible card use Some banks even offer seasonal promotions, such as discounts during holidays or special shopping occasions, providing students with convenient spending options

c Building a Credit History

Using a credit card responsibly helps students build a positive credit history, which is crucial for future financial transactions A good credit history demonstrates a person’s reliability when borrowing, especially for large loans like buying a house, a car, or investing in business By making timely payments and avoiding overdue balances, students can gradually build a strong credit profile, laying the foundation for favorable interest rates on future loans In many countries, credit history is an important factor when assessing personal creditworthiness Although personal credit scoring is not yet common in Vietnam, students with a good credit record still have an advantage when dealing with banks and financial institutions Some banks are more likely to offer higher credit limits or approve larger loans for students with a trustworthy credit history

d Emergency Support

Credit cards provide students with a source of emergency funds to cover unexpected expenses, such as laptop repairs, medical costs, or emergency travel tickets With a credit card, students can spend immediately without waiting for family support or taking time

to borrow from other sources This emergency fund not only provides peace of mind but also prevents students from facing cash shortages during urgent times For instance, if there’s an immediate need but the student has to wait for scholarship disbursement or

family assistance, they can use the credit card for immediate expenses and repay when they receive funds

3 Challenges and Risks of Using Student Credit Cards

a Risk of Debt

Students often lack experience in managing spending and budgeting, making them more likely to overspend without realizing the consequences Owning a credit card enables them to spend before having the money, which can be tempting but also risky If they fail to pay the full balance each month, the debt will accumulate with high interest, leading to financial strain later For example, a student might overspend on holidays, travel, or social events without thoroughly considering their ability to repay This can quickly lead to debt and negatively affect their credit history

b High Fees and Interest Rates

Failing to pay on time or making only the minimum payment results in high interest and late fees on the remaining balance Banks typically set high credit card interest rates to compensate for credit risk, especially for young customers without an established credit history

Examples:

e The Vietcombank credit card charges interest rates from 18% to 25% per year on overdue balances

e The VPBank card charges up to 28% annually if the minimum balance is not paid each month

c Low Financial Management Awareness

Due to limited financial knowledge and experience, students may struggle to control their spending and establish a budget Many students are unfamiliar with monthly budgeting, making it easy to exceed their spending limit without a clear repayment plan Lack of financial awareness can lead to unwanted financial consequences, such as prolonged credit debt and poor credit scores Without guidance and oversight, students can fall into financial difficulties, impacting future financial transactions This can lead

to mental stress and financial strain, affecting both their lives and studies

4 Tips for Using a Student Credit Card

- Plan Spending: Students should set a monthly budget and only use the card for necessary expenses

- Pay on Time: Avoid interest and penalties by paying off the full balance each month

- Limit Cash Withdrawals: Cash withdrawals from credit cards usually incur high fees, e.g., some Vietcombank cards charge 4% per transaction

5 Suggested Solutions

To better support students in effectively using credit cards, banks can consider several measures inspired by renowned banks worldwide:

a Financial Education

Financial literacy is essential for students to use credit cards wisely and avoid debt risk Banks can organize workshops or courses on personal finance to help students understand basic financial principles For instance, Citibank in the U.S has a "Money Matters" program for students, providing resources and online workshops on personal finance, including credit-building and debt management tips

b Spending Management Tools

Recognizing students’ need for financial management, many banks have developed mobile applications and expense tracking features in Internet Banking systems These tools allow users to track daily expenses, plan budgets, and set repayment reminders

c Enhanced Support and Advice

Many students face financial issues or struggle to control spending, so having financial advisors available would greatly help Barclays in the UK offers financial advisory services over the phone or online, where students can ask about spending management

or receive guidance on handling credit card debt

d Improved Fee Policies

To encourage students to use credit cards safely and responsibly, many banks offer reduced fees or waive the annual fee for the first year HSBC in Singapore waives the annual fee for the first two years for student cardholders, which supports students by reducing financial burdens

e Early Payment Incentives

Benefits such as interest rate reductions or reward points for early payments encourage students to maintain a good credit history Discover in the U.S has a Discover 1f® Student Cashback program, offering 5% cashback on certain quarterly categories

HL Conclusion

Student credit cards are a helpful financial tool but must be used properly to avoid risks

If students can plan and control their spending, credit cards will help them manage finances more effectively and build a solid credit foundation for the future However, before using a credit card, students should thoroughly understand the terms and make a clear financial plan

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