What is a student credit card?
Student credit cards work in the same way as other credit cards but you usually need to be enrolled in study to apply, and will need to provide your student number and proof of enrollment while applying for a student credit card.
Student credit cards tend to have low credit limits with no annual fees, to help make them affordable for students. They also typically have very basic features that are designed to help you learn how to manage money without incurring massive costs for life after university.
The majority of student credit cards also require you to have a student bank account with the lender offering the card. For example, to be eligible for a TSB Student credit card, you’d need to be an account holder with the bank TSB.
Is a student credit card a good idea?
Student credit cards can help you manage your expenses while you’re studying. They can also lay the basis for future lending options such as car loans or mortgages. This article looks at exactly how a student credit card works, the pros and cons of using a credit card while studying and how to compare cards so that you can decide if this is an option that will be manageable for you.
How much will a student credit card cost?
The cost of a student credit card varies on the specific features of individual cards and what the banks are offering. The main features to consider are:
Firstly, annual fees. Most student credit cards come with a low annual fee or no annual fee, to help keep your account costs down. If you are considering a credit card that comes with an annual fee, factor the cost of an annual fee into your budget and check the terms and conditions for any annual fee waivers.
Secondly, purchase rate. This is the standard variable interest rate that has been applied to new purchases made on the card. Student credit card purchase rates range around 22% p/a, and are often higher. Interest rates on student credit cards are typically higher than regular credit cards as they’re designed to help you learn about the lending process and build up a credit record faster. The higher your purchase rate, the more interest you will have to pay if you carry an outstanding balance on your card.
Cash advance rate. This is the standard variable interest rate that’s applied to cash advance transactions such as, cashpoint withdrawals, payment for foreign currency and even particular bill payments. The cash advance rate is typically the highest interest rate on a credit card and is applied immediately from the time a cash advance transaction has been made.
Furthermore, there is a cash advance fee. If you use your credit card for a cash advance transaction, you may also be charged a fee of around 2% to 3% of the total transaction. For example, if you used your credit card to withdraw £500 from a cash point, the cash advance fee would be £10-£15. The costly additions of cash advances means they should be avoided as much as possible when you own a credit card.
Lastly, foreign transaction fees. The majority of credit cards charge a fee when you use them to make purchases overseas or with an ecommerce site abroad. This fee is typically between 2% and 3.5% of the transaction in total. You can avoid this cost by looking into credit cards with no foreign transaction fees or other options such as travel money cards.
Other fees that may apply when you have a student credit card include late payment fees and charges for going over your credit limit without being vigilant. Always check the credit card’s product disclosure statement for further details so that you can factor in all the costs before you apply for a card.
Features of student credit cards
Student credit cards come with a wide range of features that vary depending on the specific card you choose. Some factors to consider include:
Interest-free days… if you regularly pay off your balance in full by the due date on your statements, you will usually have an interest-free period for each statement cycle, which is typically around 55 days. The interest-free days generally start at the beginning of your statement cycle.
Another feature to look out for is low credit limit. Student credit cards usually have a limit of £500. The credit limit you get depends on the card, the lender and your individual circumstances upon request. A lower credit limit is generally easier to pay off from month to month and reduces the risk of serious debt accumulating.
Complimentary extras are also a bonus. Student credit cards will come with additional benefits, such as complimentary purchase protection insurance and extended warranties for eligible items you buy with your credit card.
Will a student credit card suit your needs ?
Student credit cards are not right for everyone. Consider the following key questions before you apply for a student credit card to decide if this option will suit your circumstances and are capable of.
Why do you want a credit card ?
Do you want credit to manage your expenses between paydays ? Or, is it to have access to funds while travelling or to build up your credit? If you think about your reasons for wanting a credit card it will help you figure out if it’s right for you and also make it easier to compare different options.
Are you planning on applying for other loans in the future?
Lenders look into your credit history when you apply for any form of credit, including cards, personal loans, car loans and mortgages. Getting a credit card and using it responsibly can help you build up a good credit history and credit score so that it is easier to get approved for other financial services in the foreseeable future.
Will you be able to pay off the card in full every month?
Paying off your card in full helps you to avoid growing interest charges and reduces the risk of debt. Looking at your current income and budget, then considering how credit card payments would fit into your life, will help you figure out if a credit card is the right option for you during student life.
Are there other options that you would need to consider?
Depending on your current needs, there may be other financial products or plans that are more affordable than a credit card while you’re in education. For example, if you want to have funds in an emergency account, you could consider opening a savings account or creating a savings pot and putting some of your own money aside for unexpected events that may arise. This could help keep costs down as you’ll avoid the potential interest charges and debt that can come from using a credit card if you feel like you can’t afford to pay it off in full.
Tips for Using a Student Credit Card
Whether or not you’ve had a credit card in your possession, these simple tips will ensure you know what to do and what not to do when you get your student credit card:
- Only use your credit card for items that are absolutely essential. This strategy usually prevents impulse spending, which will run up a credit card in no time. If you want to buy something but don’t need it straight away, consider saving up for it instead after your monthly pay cheque. Keeping your credit card at home and saving it for emergencies is a good way to curb the temptation to spend when outside the home.
2.Try to pay cash for your day-to-day spending. Remember that credit card spending has to be paid back eventually and could lead to interest charges and other fees if you carry a balance. For everyday spending, you may want to consider using a student debit card, which allows you to use your own money as it is not a credit card.
3.Set a monthly and weekly budget. If you spend more in one week, you can adjust your spending for the next week so that it is affordable based on all your financial commitments, this includes your credit card payments. Get started with a budget planner.
There is also the option to…pay as you go. While credit card statements usually come once a month, you also have the option to pay off the balance more regularly. As well as ensuring that you always meet the minimum repayment, this strategy can reduce the amount of interest you pay and can help improve your credit score.
4.Try to save a portion of your income in an emergency account. Ideally, you should aim to put away 10% of your income at the end of each month. If that’s too difficult as a student, aim to save at least 5% of your pay so that you have some money set aside if something unexpected or last minute comes up. This money will help keep your costs down in an emergency, even if you have to use a credit card to pay the difference.
5.Make sure you have some money budgeted for ‘fun’ time. Credit cards can make it tempting to spend money that you don’t actually have. By budgeting for luxuries or a bit of fun, you’ll be in a better position to keep your spending and your credit card balance in check for the future.
Also, you can enquire about split payment options. Many businesses allow you to use a combination of cash and cards. This type of payment can be a useful way to keep your credit card balance down while also allowing you to keep some of your own money available for upcoming expenditures.
How do you compare student credit cards ?
Comparing student credit cards allows you to see features of different products so that you can find one that will suit you personally. We’ve outlined the main factors you’ll need to consider for a student credit card comparison in just a bit…
Please consider your individual circumstances. This includes your study commitments, your income from work, student loans and other benefits, and your ongoing expenses outside of work and study. You should also consider your current money habits to decide whether or not you will be suitable to manage a credit card.
It is also good to take into consideration the features of the cards. Pay particular attention to the standard interest rates and fees, as well as the requirements to meet any student discounts or waivers offered by the bank.
Don’t just go for the card your bank tries to offer you. Most student bank accounts will come with the option of getting a credit card as an addition. If your existing bank offers one as part of their student banking package, you are not obligated to take it. Consider its features and interest rates and be sure to compare it with other cards on the market before committing to the card.
How do you apply for a student credit card ?
After comparing numerous student credit cards to find the right option for you, the next step is to apply. You can do this online in about 20 minutes via the lenders page and ensure that the application page is secure. Before filling out your information on the application, make sure you meet the credit card application requirements as you last step.
How to apply for a student credit card
After comparing student credit cards to find the right option for you, the next step is to apply. You can do this online in about 20 minutes via the lender’s secure application page. Before filling out your information, make sure you meet the credit card application requirements. These can vary, but generally include:
Eligibility requirements checklist
- Age. You need to be over 18 years of age in order to apply for a student credit card.
- Residency status. You’ll need to be a UK resident to apply for a credit card in the UK.
- Student status. You must be enrolled in an accredited school or university to get a student credit card.
- Savings or everyday bank account. In some cases, you may be required to have an everyday bank account or savings account with the same bank that issues the credit card. Banks offering specialist student credit cards might want you to have your student account with them, as well.
- Credit history. For most applicants, a student credit card is their first credit product, meaning they do not have existing credit history. Credit limits for most student cards are low to minimise the bank’s risk of default and give students a pathway to build their history. As long as there are no blemishes on any existing credit reports, your application should be approved if you meet all of the other eligibility requirements.
The documents and information you’ll need to provide
If you meet these application criteria, you can fill out the online form. You’ll need to provide a range of details, including:
- Personal information. This includes your full name, date of birth, residential address, email address and phone number. You’ll also need to provide a valid form of identification, such as your driver’s licence number or passport number.
- Student information. You’ll need to include details of the institution and course you’re enrolled in.
- Employment information. If you work outside of study, you’ll need to provide details of your employer and income, such as contact details and recent payslips.
- Other financial information. You may be asked to include details of any assets and debts that you have, including savings accounts or other credit card debt. You may also be asked to estimate your ongoing financial commitments, such as rent, bills and grocery costs. This helps the issuer determine whether or not you can afford to manage a credit card.