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Student credit cards

Student credit cards

If you use it responsibly, a student credit card could help you manage your money while you’re studying. It’s also a way to start building up a positive credit score. Having a good credit history could make it easier for you to apply for loans in the future, as well as maximise your chances of benefitting from premium interest rates.  
Read our guide on what you need to know before you apply… 

Anelda Knoesen
From the Money team
minute read
posted 17 JUNE 2020

What are student credit cards?

Student credit cards work in the same way as a normal credit card, but they typically have no annual fee and a low credit limit to help you avoid taking on too much credit.

For many students, a student credit card is typically their first credit card and is likely to be used to make purchases. Many providers offer a 0% interest introductory period on purchases, which can be useful for necessities.

How do student credit cards work?

Essentially, a student credit card allows you to spend more money than you actually have at any given time. This often comes in handy when you need to buy something costly for the sake of your studies, like textbooks or some tutoring sessions. You’ll then need to repay what you’ve spent. If you manage to do this within the interest-free period, you won’t have to pay any interest on the credit. If it takes you a little longer, you’ll pay a certain amount of interest, which will vary according to each individual credit card provider.  
Most credit cards for students will come with a pre-determined limit, so you won’t be able to continue spending indefinitely. And you should never borrow more on a credit card than you can afford to pay back. 

What are the advantages of a student credit card?

It’s important to understand the advantages and disadvantages of having a student credit card before you apply. 
Advantages can include
Building your credit score:  A student credit card can help improve your  credit score  if you keep up with your minimum monthly repayments. If you can, you should pay off more than the minimum each month to clear any outstanding debt as quickly as possible. 

Purchase protection:  Under Section 75 of the Credit Consumer Act, you can get a full refund from your card provider on single purchases from £100 to £30,000 if the item you’ve bought is damaged, stolen or doesn’t arrive. 

Discounts: Some student credit cards also come with exclusive discounts that can help you to save money while you’re studying, such as a Railcard that gives you a third off most rail fares in England, Scotland and Wales. 

Spreading the costs of purchases:  You can buy something today, then repay the money over several months. 

Rewards: Some student credit card providers offer access to loyalty points or instant cashback rewards whenever you spend.   

What are the disadvantages of a student credit card? 

While there are a number of advantages that come with owning a student credit card, it is important to consider the disadvantages too.  
Disadvantages can include

Debt:  If you fail to keep up with the monthly repayments, you can land yourself in debt. It can also negatively impact your ability to apply for credit in the future. 

High interest rates: If you don’t pay off the balance of your student credit card in full each month, then you can also find yourself paying high interest rates. 

Credit limits: Credit limits are often calculated based on income. This means that they can often be lower than average for students – so you might need to get more funds from elsewhere if you need to make a particularly large purchase.  

What should I consider before applying for a credit card?

If you haven’t been offered a student credit card by your bank, ask about your options and whether you’re likely to be accepted for one. Before applying for any credit card, there are a few things you should consider:

  • Check your credit score.
  • Use a credit card eligibility checker to avoid applying for cards that you may be declined for.
  • Check the annual percentage rate (APR) as this is how much you’ll be charged in interest if you don’t pay off the balance in full each month. As you pay off the debt, the amount of interest you pay will also reduce. 
  • Check all the penalty charges for going over your credit card limit or missing a payment.
  • Never spend more than you can afford to pay back.
  • Consider whether you believe you can use the credit card responsibly or whether you feel it may tempt you to spend more than you should.  
  • Check the annual fee. It’s often possible to get credit cards for students without an annual fee.  
  • Check the rules on using your student credit card abroad. This is especially important if you’re a frequent traveller.  

Who is eligible for a student credit card?

Eligibility criteria for a student credit card will vary from provider to provider. Generally, however, you’ll need to: 

  • be a legal adult (18 years and older)  
  • have been living in the UK for at least three years 
  • have a student bank account with your chosen provider 
  • prove you’re currently registered to take a course lasting for a minimum of two years. 

Will I need a job to get a student credit card?

Not always, no. You will, however, need to prove that you’re bringing in a regular income of some sort that isn’t related to your student loan. This could be through a part-time job or a consistent amount paid into your student bank account by your parents. Having said that, there’s no doubt that having a job will improve your chances of getting your student credit card application approved, and it may even result in lower interest rates too.  

How to manage student credit card spending and repayments

Effectively managing your student credit card spending and repayments is very important if you’re to build a good credit score and avoid any unnecessary fees along the way. Here are some tips: 

  • Pay your statement balance in full within 30 days: If you do this, you usually won’t have to pay any interest. This will mean that you’ve maximised the credit available to you without spending anything extra in the process. If you’re unable to pay the full amount, be sure to repay at least the minimum amount due to avoid penalties.  
  • Avoid using your credit card to withdraw cash: iIt’s possible to withdraw cash at an ATM using your student credit card, but it definitely isn’t advisable. If you do this, you’ll face two separate charges – daily interest on the amount you withdraw and a cash advance fee. 
  • Avoid going over your credit limit: Not only should you avoid going over your credit limit, but you should aim to spend well under it too. The closer you spend to or over your limit, the higher the chances of your credit score taking a knock.  
  • Make use of purchase protection when necessary: According to Section 75 of the Credit Consumer Act, you can get a full refund from your student credit card provider on single purchases from £100 to £30,000 if the item is damaged, stolen or doesn’t arrive. 

What will happen to my student credit card after I graduate?

Most student credit card providers will notify you ahead of the time that your credit card is set to expire in line with the completion of your course. They’ll often offer to upgrade your bank account and your credit card to a graduate account and a graduate credit card.  

This may be a good time to compare your options before accepting the offer from your current provider. As a graduate, especially if you were diligent about managing your credit as a student, you may have access to attractive deals and offers from other providers out there.

Is there an alternative to a student credit card?

If you already have a  student bank account, you could be entitled to a  student overdraft, which may be a more suitable option than a credit card. An overdraft can be a safety net for emergencies or necessities, and if you use it sensibly it won’t negatively impact your credit score. 
Many student accounts will offer interest-free overdrafts during the course of your studies. Assuming you stay within your authorised overdraft limit, you won’t have to pay any interest on that overdrawn balance until after you  graduate

Comparing student credit cards

Compare the Market can’t help you compare student credit cards specifically – but we can help you compare all the credit card options currently available to you. Give it a try now. 

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