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How to Choose the Best Credit Cards for Students

Tom Church
Tom Church
  | Edited by Tom Church
Updated 4th February 2021

Students don’t tend to have a credit history which means getting a credit card can be difficult. Thankfully, student credit cards do exist. These cards can help build a strong credit history and teach good money management skills. Read our guide for the best credit cards for students and tips on how to use a credit card sensibly.

Can students get credit cards?

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Students can get credit cards and there are even credit cards on the market designed specifically for students. Student credit cards are more likely to accept those who are studying at university and don’t have a regular income or credit history.

What is a student credit card?

A student credit card is for college and university students who don’t have the income or credit history to get approval for a normal credit card. Student credit cards work like regular credit cards but they have higher interest rates, lower credit limits and fewer rewards.

Despite this, these credit cards can be a way for students to learn how to manage money and build a strong credit score at a young age.

If you are a student and this is your first time learning about credit cards there are four things you must know now:
1. A credit card is DEBT.
2. You must pay it off every MONTH.
3. If you don’t, you will be charged INTEREST. This is bad.
4. Fail to pay it back and you will get a bad credit score. This is bad - it will affect your future chances of getting a mortgage for a house, personal loans, and other services (even things like a mobile phone contract).

How does a student credit card work?

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Student credit cards operate in the same way as standard credit cards:

  • You borrow money from a company - usually a bank - in the form of a credit card.
  • You spend that money.
  • You pay that money back.
    • If you don’t pay that money back, you get charged interest and your debt grows.
    • You then have to pay even more money back.

A student credit card allows you to borrow money that you don’t have. You'll be set a minimum monthly amount you have to repay and if you miss a payment you will be fined. A black mark will be put on your credit history.

Student credit cards have a lower credit limit than other cards because, without a credit history, lenders don’t know if you can borrow and repay money. This is why you aren’t allowed to borrow large amounts.

Credit cards for students have a higher interest rate than standard credit cards.

What is interest? Please read this guide on an introduction to credit cards

This means that if you don’t clear your balance every month, a high-interest rate will be applied to the money you’ve borrowed and are yet to pay back.

For example, if your student credit card comes with an APR of 24% and you spend £500 that you don’t pay off for a whole year, you’ll be paying back £500 plus £120 interest. So, you’ll have to pay £620 in total. You can see how expensive credit cards can get.

Only borrow what you can pay back. Pay off your debt in full every month. If used properly, student credit cards can provide many benefits.

How are student credit cards different?

Student cards are very similar to normal credit cards. However, there are some key differences:

  • More likely to accept students.
  • Don’t require a strong credit history or high income.
  • Have lower credit limits. 
  • Higher interest rates.

Who is eligible for a student credit card?

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To be accepted for a student credit card, you’ll need to meet the following criteria:

  • Aged 18 or over.
  • Living in the UK for at least three years.
  • You’ll usually have to have a bank account with the credit card provider (you can open an account with a different provider in order to get the card you want).
  • Enrolled on a course at a UK college or university for at least two years.

Should I get a student credit card?

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Owning a credit card can be a great tool as a student if you use it sensibly. You can build up a strong credit score which will make it easier to get the best credit cards and loans in future. However, if used carelessly - like spending it all in the Student Union -, you could damage your credit score and rack up large amounts of debt with high-interest added on top. 

Let’s take a look at the pros and cons of student credit cards to help you decide whether or not it’s for you.

Pros of student credit cards

  • Build your credit score - manage your student credit card well and you can build up your credit score. A good or excellent credit score will help you to get credit cards, loans and mortgages in the future.
  • Section 75 protection - if you make a purchase over £100 with your student credit card you’ll be protected under Section 75 of the Consumer Credit Act. This means that you’ll be refunded if you don’t receive items, they are faulty, the company goes bust etc. 
  • No annual fee - student credit cards don’t tend to charge an annual fee.
  • Learn money skills - using a credit card as a student will teach you personal finance skills. Learning how to manage borrowed money is an invaluable skill. 
  • Higher chance of approval - students might struggle to get normal credit cards which make student credit cards a great option. 
  • Spread the cost of large purchases - if you need emergency funds or make a large purchase, you can use your student credit card. Beware of added interest if you can’t pay off your balance before the end of the month.

Cons of student credit cards

  • High-interest rate - student credit cards have higher interest rates than normal cards. This means you’ll end up paying more back if you don’t clear your balance every month.
  • Low credit limit - credit cards for students have lower credit limits to encourage responsible borrowing. This means that you’ll borrow less than you would with a normal card.
  • Fees - as with all credit cards, you’ll be charged fees for withdrawing cash, making a late payment, exceeding your credit limit or using your card abroad. Be wary of student credit card fees as they can add up. 
  • Risk of debt - whenever you use any credit card and borrow money, you are running the risk of getting into debt. If you don’t clear your balance, high-interest can make your debt very expensive to pay off.

There are some questions you should ask yourself to help decide whether a student credit card is for you.

Can I responsibly use a credit card?

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Can you trust yourself to only make sensible purchases using your credit card? Or will you go on a spending spree with borrowed money? If you are responsible with money, then a student credit card could work for you.

Student credit card debt is not the same as your student loan. You need to pay off your credit card debt every month starting now. 

Remember, fail to pay off your debt and you are charged interest. That means your debt gets bigger and bigger.

Do I always pay my bills on time?

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Are you used to paying your mobile bill, for example, on time every month? Have you ever paid bills before? Do you have the discipline to pay every month? If you miss a credit card payment, you’ll be charged a late fee and a mark could be put on your credit history which will damage your score. 

How to pay back your debt from a student credit card

The best way to pay back your student credit card debt is to set up a direct debit. You should do this immediately - as soon as you get the credit card. A direct debit is similar to what you may have for your mobile phone contract, or Netflix, or a gym membership. It gives the credit card company the ability to automatically take money from your bank to pay off your debt. This is good because then you don’t need to remember, it’s automatic. However, you must make sure there’s enough money in your bank to pay it off! 

Set up a direct debit for at least the minimum amount every month so make sure that you never forget!

Do I have any income?

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As a student, your main focus is studying and you might not have any income coming in from jobs on the side. Before applying for a student credit card, make sure that you can afford to repay at least the minimum amount every month. If you have no income, you won’t be able to pay back what you borrow, meaning you’ll get into debt. 

Wait - isn’t the whole point of a credit card that it gives me money I don’t have?

No. You should not get a credit card if you do not have income, or guaranteed future income. You should only get a credit card if you can pay off the debt every month.

How do I get a student credit card?

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Before applying for a student credit card, narrow down your search by picking a few cards that appeal the most to you (see below for ‘How to choose a student credit card’). 

Next, go onto the card provider’s website and use the eligibility checker to see how likely you are to be accepted. Eligibility checkers only suggest whether or not you might be accepted, it’s not set in stone.

However, if the checker suggests you won’t be accepted, don’t apply and move onto your next card choice. If you apply for too many credit cards and get rejected, this will harm your credit score and means you’re less likely to be approved for a card. 

Most student credit cards will require you to have a student account open with them before applying for a card. 

You can apply for a student credit card online, in a branch, over the phone or post. 

Once you’ve been accepted, it can take up to ten days for your credit card to arrive in the post. Remember at this point to set up a direct debit from your bank account.

How to use a student credit card

If you’re a student and want to build a credit history then a student credit card can be a great tool. There are some things to look out for though. Follow our golden rules to avoid any credit card mistakes.

1. NEVER miss a monthly payment

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Your payment history is one of the most important things that contribute to your credit score. Make sure you make at least the minimum monthly credit card payment on time every month. This will give you a strong payment history and avoid any late fees being added onto your bill.

Set up a direct debit to pay off your credit card bill every month so you can relax knowing that it’s covered without having to remember! (You just have to make sure you have enough money in the bank to cover it).

2. Only borrow what you can afford to pay back

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Credit cards don’t act as access to unlimited free money. You have to pay that money back, so only spend what you can afford to pay off. 

Your aim should be to clear your credit card balance every month to avoid paying high-interest. Achieve this by only spending what you know you can pay back before interest is added.

3. Don’t spend more than your credit limit

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Student credit cards have lower credit limits than normal credit cards. Without a credit history, lenders don’t know if you can sensibly borrow and repay money. 

Never exceed your credit limit, no matter how low it may be. You’ll be charged a penalty for overspending and it’ll be marked down on your credit history. Keep checking your spending to make sure you’re below your limit and pay off as much as you can.

4. Avoid withdrawing cash on a student credit card

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As soon as you withdraw cash using a credit card, you’ll be charged interest immediately and often at a higher rate. On top of this, you’ll be charged a cash withdrawal fee on your bill. 

It isn’t worth the cost and will add to your debt very quickly!

How to choose a student credit card

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If you’ve decided to go ahead and apply for a student credit card, there are a few points you can consider to find the perfect card for you:

  • Annual fees - the majority of student credit cards don’t have annual fees. If you come across a student card that does have a fee, take a look at what rewards it offers. Sometimes student credit cards with annual fees might offer cashback, points and other rewards.
  • Annual Percentage Rate (APR) - all student credit cards will have a high-interest rate. Try your best to find a card that has the most competitive APR. APR includes the interest rate and any additional fees that come with a credit card. APR is essentially your annual interest, which means if you borrowed £1,000 with a 10% APR, you’d pay £100 in a year if you don't pay your balance back.
  • Credit limit - most student cards don’t offer a credit limit higher than £1,000. If a higher credit limit is offered, think before you take it, if it’ll encourage you to spend more, then maybe steer clear!
  • Travel - compare whether the card you are looking at allows you to use it abroad without charging huge fees. Some student credit cards might waive this fee. If you are looking for a card specifically for travel, travel credit cards might interest you.
  • Current account - many student credit cards will require you to have a current account with the credit lender in order to be approved for a card. Don’t just go with your current account lender because it’s easy, rival lenders might offer a better deal. Always compare your options.

I can’t meet my minimum credit card payments due to coronavirus. What should I do?

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Coronavirus has put a financial strain on many. If you have a credit card and are struggling to meet your minimum repayments, you may be eligible for help.

The Financial Conduct Authority (FCA) has introduced measures that allow you to request a freeze on credit card repayments for 6 months. However, you may still be charged interest in this period.
You have until the 31st March 2021 to request a freeze but make sure you agree with your lender before stopping repayments. This won’t leave a bad mark on your credit history either due to the exceptional circumstances.

If you can afford to keep paying, it’s best to do so as you will still be charged interest during this holiday period.

All payment holidays must end by 31st July 2021.

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