If you are thinking of getting a student credit card at university, it’s important that you understand how they work. Banks offer specific credit cards just for students and put a limit on the credit they make available. The limit is typically around £500, so if you want more than that you will need to look at different options. If you have a regular income stream you may be able to get a standard credit card from the bank instead of a student credit card. This will give you a wider choice of credit cards on the market.
However, at least with a student credit card you won’t get carried away spending a thousand or two on grey goose and champagne one evening – aren’t the banks thoughtful?!
Why is a student credit card a good idea for some?
A student credit card can be useful as it can help you to organise your finances while you are at university. With most student credit cards, you can get up to 56 days before you have to pay off what you have spent and won’t have to pay any interest before then.
If you love to shop, a credit card can give you more protection over your purchases than debit cards can. Under section 75 of the Consumer Credit Act, if you are having problems with your purchase, such as it being lost or stolen, and the supplier refuses to deal with it, you can claim a refund from your credit card instead. However, this protection only applies to purchases above £100 and below £30,000.
Another reason why a credit card is a good idea for some is it enables you to build up a credit history which you need when applying for a mortgage or any other kind of loan. Starting to develop a credit history when you are a student could be sensible as mortgages are becoming more difficult to obtain than they have been in the past. Bear in mind, if you have a poor credit history it can make getting a mortgage a lot more difficult, so if you decide to get a student credit card – make sure you pay it off when you’re suppose to.
Factors to bear in mind:
- If you pay your student credit card balance off when you’re suppose to, you won’t be charged any interest. However, if you don’t pay it off in the time allowed, the cost of borrowing can be hefty due to their high interest rates.
- You might not know that you CAN use your credit card to withdraw cash from an ATM, but it will cost you. Banks charge you a fee of usually around 3%. Cash withdrawals also attract a higher rate of interest than a purchase.
- There are additional charges for late payments, charges for exceeding your credit limit and overseas spending.
Student credit cards providers:
If you decide to sign up for a student credit card, always aim to pay your balance off in full to build up your credit rating and ensure you remain in control of your spending. If you are disorganised and forgetful, don’t get one!