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Student credit cards

Find out about the pros, cons and alternatives to credit cards for students, as well as the best ways to borrow money at university, and how to compare student credit cards.

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The best student credit cards can give you flexibility over your spending and help you learn how to manage credit. Find out which are the best credit cards for students and understand how to choose a cheap student credit card.

How do I find the best student credit cards?

Find out about the pros, cons and alternatives to credit cards for students, as well as the best ways to borrow money at university, and how to compare student credit cards. Student credit cards can be useful while you are at university, but in order to keep the costs down you need to learn how to use them wisely.

Compare credit builder cards

Find a credit card designed to help you improve your credit rating.

The first thing to understand about student credit cards is that any spending on them is debt which needs to be repaid. If you repay your credit card balance every month and stay within your credit limit, you will not pay any charges. In effect, you are benefitting from an interest-free period on your card which can be as long as 56 days from the time you make a purchase.

If you do not pay off your balance each month, then you will be charged interest on the outstanding balance.

As with any form of credit, it is important to be clear about how much you can afford to borrow and how you are going to pay the debt back. Unlike traditional credit cards, student cards tend to have a relatively low credit limit, which is the maximum you are allowed to spend on the card before it is refused by a retailer.

Even though the credit limit is quite low, it is easy to build up debt if you do not have a repayment plan. Think about how much you can afford to spend and be careful if you start to use your credit card for essential items like food because you are struggling with cashflow problems.

If you find you are getting into debt you can ask for help from a student support service on campus or talk to a free debt counselling service from a debt charity.

It is important to think about your credit card borrowing in terms of your overall debt. Do you have a bank account overdraft as well as a student loan? Will your student loan be able to cover your spending costs? Remember that credit cards, loans and overdrafts are all forms of debt which will eventually need to be repaid. 

What is the best way to use a student credit card?

The best way to use a student credit card is to use it for large or occasional purchases, such as a rail ticket, holiday or new laptop. 

This is because it can help spread the cost of the item, and you also get consumer protection on goods or services that you buy with your credit card that cost more than £100.

If you buy a couple of items on your student credit card and pay off the balance each month, you are demonstrating to future lenders that you can handle credit. This will build up a record of your financial history on your credit report and start to build your credit score. Having a good credit score can mean that in the future, when you might want to apply for a mortgage, lenders can see that you are responsible with your finances.

What are the advantages of credit cards for students?

  • A credit card for students can be a good way of paying for things while you are at university or college – you can get up to 56 days to pay off whatever you spend on it before you have to pay any interest.

  • Credit cards for students have a low credit limit (usually around £500) so that you can't get into too much debt.

  • Some student credit cards come with exclusive discounts, which can help you to save money while you're studying.

  • By using a credit card instead of a debit card, you get protection under the Consumer Credit Act, which means if you pay for something costing over £100 on your credit card and less than £30,000 and something goes wrong, the credit card provider will be able to give you a refund.

  • Additionally, if you use it the right way, a student credit card can help you to get into good payment habits, for when you leave university.

What are the disadvantages of student credit cards?

There are numerous advantages, but there are some things to consider before applying for a credit card.

  • After the initial interest-free period, you will have to pay off a set minimum amount and start paying interest on the rest of your balance too – which can get expensive.

     

  • A credit card for students doesn't come with the 0% deals on purchases or balance transfers you get with standard credit cards, so they may not be a good idea for borrowing in the longer term.

     

  • The monthly minimum repayments on student credit cards are usually higher than those of standard credit cards.

What are the alternatives to a student credit card?

If you are looking for ways to borrow money to fund yourself while you are at university, then you might want to think about how you could supplement your student loan with a part-time or evening job.

Another way of borrowing money is with a student bank account. The biggest benefit of a student account is that most of these accounts come with an interest-free overdraft.

The interest free amount usually increases for each year of your degree. After you graduate, you have to start paying interest, but they're still a great cost-effective way to borrow while you're at university. They also enable you to demonstrate to lenders in the future that you were able to handle your finances in a mature and effective way.

If you want the convenience of a credit card, then a prepaid card could be a good alternative. You can compare prepaid cards with Uswitch.

Prepaid cards work like credit cards, except you pre-load money onto the card (a bit like topping up a pay as you go mobile phone), so they're a great way to pay for things in shops and online and there's no way you can get into debt.

Compare credit builder cards

Find a credit card designed to help you improve your credit rating.