How to find the best student credit cards
A CREDIT card can help spread the cost of big purchases and can even be used during university life to boost your financial prospects.
Here is how to find the best student credit cards – but there are many risks to consider. We explain.
Can a student get a credit card?
Students are able to get a credit card.
You can usually apply for one from the same provider as your student current account.
Users typically must be over 18 and on a UK university or college course for at least two years.
What is a student credit card?
Like a normal card, a student can get their own credit limit to help cover university expenses and other costs.
A student may be more likely to get approved for this type of card as many will not have built up a strong credit rating to be eligible for standard credit cards.
A student credit card can be used for spending and there may be an interest-free period for purchases.
As with any credit card, you will need to pay your monthly credit card bill or may face hefty interest rate charges, known as the annual percentage rate (APR).
These APR fees can be as high as 20%.
How is a student credit card different from a regular credit card?
A student credit card tens to have a lower limit to reflect the borrower's credit rating.
It also ensures the debt is more manageable.
The best student credit cards have liits ranging fron £500 to £1,000.
You will usually also need to already have a student account with the same bank.
How does a student credit card work?
You will usually need to apply for a student credit card from the same bank that you have a current account with.
The bank will approve a credit limit and you can spend as you wish.
This can be useful if you need to pay for something urgently for your studies such as textbooks but are still waiting for your student loan or other income to arrive.
There will be no APR charges as long as you stay within your limit each month and make the monthly repayments.
There may even be an interest-free period.
What are the advantages of credit cards for students?
As long as you spend responsibly, the best student credit cards can have several benefits.
It helps you spread the cost of a large purchase such as if you need new furniture for your student house.
You also benefit from purchase protection under Section 75 of the Consumer Credit Act.
This means a credit card provider can refund purchases from £100 to £30,000if the item is damaged, stolen or doesn't arrive.
Some student credit cards may offer perks such as interest-free spending, rewards or discounts.
Plus, using a credit card and paying off the bill each month can help build your credit score as it shows evidence that you can manage your debts.
This will help you access more of the best credit card deals and other types of finance in the future.
What are the disadvantages of student credit cards?
As with any credit card, if you fail to keep up with repayments you will be charged the APR and this could push you into debt, which can negatively impact your credit score.
Student credit cards tend to have comparatively high interest rates if you miss payments as well.
You also won't get as large a limit even on the best credit card for students compared with standard products.
This is meant to help you control your spending but if you go over your limit you will be charged the APR.
Do I need a job to get a student credit card?
Having a job isn't essential but it could boost your chances of getting accepted.
A credit card provider will want to see evidence of some income coming into you bank account so they can be reassured that you can make the monthly repayments.
This doesn't include you student loan but could be money that is paid into your account from your parents regularly.
Why do banks charge more interest on student credit cards?
Even the best UK credit cards for students may have high interest rates.
The high APR reflects the risk a provider is taking as many young students may not have built up a strong credit history yet.
A student credit card may be your first financial product so you won't have had much time to build your credit score and it is unclear to a provider how you can manage their debts.
What should I put for income on my application?
Money you get from a part-time job or regular funds from your parents can all count as income on your application.
A provider is unlikely to accept your student loan as proof of income as this is just another form of debt.
Can you use student loans to pay off credit card debt?
It may be tempting to use your student loan payments to payoff your credit card debt.
But this isn't necessarily the most effective strategy as the student loan payments you receive are meant to cover living expenses and your studies.
You could be left with a shortfall if you use the loan money to pay your credit card bill and end up falling further into debt.
Can a student credit card improve my credit score?
All types of debt repayments, including the best UK credit cards for students, can help boost your credit score if used properly.
Providers like to see evidence that borrowers can theirmanage debts on time.
The more years you have of managing debts the better your track record and the higher your credit rating could be.
This makes it easier to access the best loan and credit card offers in the future.
However, there is also a risk that you could harm your credit rating if you miss repayments or have successive application rejections.
How to choose a student credit card
Student credit cards will have a range of perks such as cashback or interest-free spending periods.
There will also be different credit limits.
Use a comparison website to compare the best credit cards although you may need to switch account if you don't already do your banking with a provider.
Also be aware of the APR in case you do miss payments and check if there are any restrictions and charges for withdrawals or overseas spending, including on international websites.
How to make the most of a student credit card
A student credit card can be a great way to spread the cost of purchases and even in some cases to get interest-free spending.
It is vital to pay the bill each month though to avoid charges.
You could setup a direct debit from your bank account that clears the balance each month without you having to worry about it.
Just make sure there is enough money in your account.
If you are spending more than you are earning it may be worth cancelling or not using your card until you have reduced your expenses.
What is a credit limit?
The credit limit is the maximum you can spend on a credit card each month.
This will be set by the credit card provider based on your income and credit rating plus what they think you can afford.
There will be no extra fees as long as you stay in your limit but you will be charged the APR if you go beyond it.
Only use the credit card if you know you can pay the bill and stay within your credit limit.
This way you will avoid APR charges which can damage your credit score and make it harder to get finance in the future.
How should I repay my credit card?
There are two ways you can pay your credit card bill each month.
The provider will give you an option to clear the balance or make the minimum repayment.
Paying the full balance will settle the debt and reset your credit limit.
Alternatively, a provider will set a minimum repayment based on a percentage of the amount you have spent.
This is usually between 1% to 2.5%.
Paying the minimum may sound convenient but you could end up in more debt as you will be charged the APR if you are outside an interest-free period.
Even if you have an interest-free deal, you should make sure the full balance is cleared by the end of the term to avoid APR charges being added.
It is often best to setup a direct debit that clears the whole balance each month to ensure you don't get charged interest and don't miss any payments.
Does my credit score matter?
Your credit score is one of the most important factors when applying for a credit card.
A provider will want to see evidence that you can manage your debts.
Your credit score is the best indicator of this as it records all your overdrafts, credit cards or loans that you have ever had.
Making regular repayments can boost your credit sore and the longer your track record, the higher your score could get.
Other factors such as being on the electoral register also help.
If you have a low score or no track record a provider will often give you a lower credit limit, charge higher APRs or could reject you altogether until your rating improves.
Poorly managed debts, county court judgments and bankruptcies can all be detrimental and push your credit score down, making it harder to access credit as providers will think you are too risky.
How do I apply for a student credit card?
You can search for the best student credit card deals either directly from a bank or building society or search and scrutinise offers using a comparison website.
Work out the features you want such as interest-free spending or cashback and also check the credit limit and APR
Comparison websites and providers can often do a soft search that won't affect your credit rating but will tell you which deals you are most likely to be approved for.
Once you have decided on the card you are after just fill in the online form on the credit card company's website.
You will need to provide your name, age and bank account details as well as proof of your income.
When you apply for a credit card your bank will check your credit score to see if you suitable for the deal they are offering.
The better your credit score the more likely it is that banks will accept you for the best deals, as they only have to provide their best credit card offers to 51% of applicants.
What happens to a student credit card once I graduate?
Depending on the expiry date, you may still be able to use the card once you graduate.
But hopefully by the time you leave university you will have built up a few years of paying your monthly credit card bill on time.
This could mean you have boosted your credit score and give you access to even better offers.
What are the alternatives to student credit cards?
A credit card is just one option if you need access to a little extra cash while at university.
Your student bank account may have an authorised interest-free overdraft that can be a useful safety net for emergencies or to purchase necessities.
There is no risk to your credit score as long as you stay within your limit and you won't have to pay any interest on the balance until you graduate.
Another option is working out a budget to organise your spending and see if you can free up extra cash.
You could get a part-time job to boost your income and even put some of the money in savings to try to earn a decent return.
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