Your guide to student credit cards

Whether you’re heading off to university for the first time this autumn or returning to your studies, you may well be putting your finances into focus in the coming weeks and perhaps sorting out important details like bank accounts and overdrafts. 

If you’re considering a student credit card, this guide will help you understand how they work and how to choose the right one for your circumstances.

The pros and cons of student credit cards

Most students have access to an interest free overdraft as part of their student bank account, so this is likely to be the cheapest way for you to borrow. But you may want to consider a student credit card to use for big-ticket spending, online purchases or in case of emergencies.

Can you resist the tempatation to max it out?

If you do decide to take out a student credit card you’ll need to be confident that you can resist the temptation to max it out. Life as a student can be expensive with debt repayments lasting well into your working life, so it's best to avoid situations where your debt spirals unnecessarily. 

Having a credit card can be good for certain circumstances

Having a credit card provides you with additional protection as a consumer. Under Section 75 of the Consumer Credit Act, your credit card provider is jointly responsible for any breach of contract or misrepresentation for purchases of over £100 and up to £30,000. This applies even if you’ve only paid a deposit on your card. This could help you in circumstances where a company you buy from goes bust or supplies goods that are in need of repair, or not as described.

With this in mind, if you’re planning to buy a higher value item or book a holiday, using a credit card offers protection. If you are planning to make a big purchase on credit card, it's best to save up in advance but use your credit card for the payment. Then, transfer your savings back onto the card to clear the balance before you get charged interest.

How is a student credit card different to a normal credit card?

Credit card providers will assess your individual circumstances when deciding what credit, if any, to offer you. Student credit cards tend to have lower credit limits and higher APRs than standard credit cards. You can read more about APRs in our introductory guide.

A lower credit limit stops you from building too much debt which is a good thing, but a higher APR means you'll pay more interest on anything you do borrow and pay back gradually. 

The longer you take to pay off an item purchased on your credit card, whether it's a student one or standard, the more it will cost you. If you can, establish healthy habits early on and pay off your balance in full each month, so you're not paying for that outfit you bought for a birthday night out for months or even years.

As well as knowing your APR, research each provider to see what the penalties are for late payments or going over your agreed credit limit. 

How to apply for a student credit card

Banks could offer you a student credit card as part of a wider student finance package that can include a student current account and overdraft. Some of these packages have attractive benefits like railcard discounts, or cashback from certain retailers.

Some student credit cards may be open to you whether you have your student current account with a provider or not, while others will stipulate that you have to be an existing customer. When deciding on the best student credit card for you, it’s best to compare the entire package including the APR, credit limits and any extras that you'll be able to make use of.

To take out a credit card you’ll need to prove your identity, address, income and you’ll usually need your national insurance number too.

Student credit cards and your credit score

Being able to manage credit is an important life skill and showing you can make payments on time and not build excessive debt will help you build a positive financial future. 

Having little or no credit history will restrict what providers are willing to offer you but with good management you should find your credit score improves over time. 

There will be a monetary cost associated with late payments and exceeding your credit limit and it can also harm your credit rating. This will impact your ability to secure future lending for things like loans, car finance agreements, taking out phone contracts and mortgage applications. If you decide to take out a student credit card, see it as an opportunity to prove your creditworthiness and put in you in a good position for the future.

Check your credit card statements regularly to make sure you’re aware of payment dates and pay over the minimum payment where possible to help build your credit score.

Which is the best student credit card?

The benefits that come with part of a student finance package may be tempting, but it doesn't always mean it's the best student credit card overall. Weigh up how wallet-friendly your credit card really is and look out for useful features that help you manage your account when considering student credit card providers. 

When you're searching for the best student credit card, read reviews from other customers so you know if they live up to their marketing hype or if they could do better.