Credit cards for students

Taking out your first credit card is an important step that, if used correctly, can help you build up a positive credit history and set you up for a variety of life stages – like applying for your first mortgage.

Many student accounts do come with an overdraft, which may be low cost or interest-free for the duration of your time at university, and your bank may also offer you a credit card – but you could choose to shop around instead. If you’ve decided to apply for your first credit card and you’re a student, read on for our guide to the credit cards that are designed just for you.

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Why are there credit cards just for students?

Most students are in their late teens, and so – in most cases – have only had access to borrowing of this kind since their 18th birthday. This means that they don’t have much of a credit history, which is something most lenders rely on as evidence of whether or not an applicant knows how to borrow responsibly.

Another thing standing against many students is their limited or lack of income. While they may make money working in a bar or shop when they’re not in lectures, a lender might decide that this is not enough to allow them to comfortably keep on top of their credit card repayments as well as covering all their other outgoings.

But, money can be tight for students, as loans never seem to stretch that far once course fees, rent and essential bills have been paid. Because of this, a credit card may be something worth considering – especially as there are products available just for students. If you’re a student who’s thinking of applying for a credit card, ask yourself these questions:

  • Do you have enough money to pay back your full credit card balance every month? Doing this means that you will avoid paying any interest – which can be high.
  • If you can’t clear the balance in full every month, can you pay more than the minimum repayments? Paying even a little more than the minimum can reduce the length of time it takes you to clear the debt and, therefore, the amount of interest you’re charged. Work out how much you can afford to put towards your credit card bill each month and set up a Standing Order or Direct Debit for this amount.
  • How’s your credit rating? This is your history of borrowing and is something that lenders will look at when deciding whether or not to accept your application. If you’re in your late teens or early 20s, you probably don’t have much of a credit history, but it’s still worth checking it to ensure all your details, like your current address, are up to date. You can do this by contacting credit reference agencies like Equifax or Experian.
  • Can you use it responsibly? This is perhaps the most important question to ask yourself, because, if you know deep down that money management is not your strongest skill, a credit card may not be right for you right now. If you start to miss repayments or pay less than the minimum, this could show up on your credit report and may stand against you when you apply for credit again – even years in the future.
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"If a lender decides to give you a credit card, it’s likely that you’ll be subject to higher interest and lower spending limits."

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What makes student credit cards different?

Student credit cards work much the same way as regular credit cards. However, lenders know that if you’re a student, you’re likely to have quite a low income, it may be erratic and your credit history will probably be non-existent. So, when lenders assess you for a credit card they will keep all these points in mind, applying a special set of criteria specifically to students. If a lender decides to give you a credit card, it’s likely that you’ll be subject to higher interest and lower spending limits.

This can be seen as protection for the lender. Your lack of credit history may make it hard for them to determine whether or not you’ll be a responsible borrower, and your limited income could mean they are unwilling to lend you a large sum they’re unsure you’ll be able to pay back.

What are the other advantages?

Aside from the above, student credit cards share much of the same advantages and disadvantages of regular credit cards.

One big advantage is that you can use your card in the event of an emergency. Perhaps your rent is due but your student loan hasn’t cleared yet. You could pay the bill with your credit card, safe in the knowledge you can clear the debt when your loan appears.

Another advantage is the protection a credit card provides when you spend over £100. This comes in the form of Section 75 of the Consumer Credit Act, and covers you in the event that the item you have purchased is faulty, broken, not as it was described or never arrives. While if you paid with cash or a debit card, you could only rely on the seller to provide you with a refund, when using a credit card both the seller and your lender are liable.

The disadvantages of using a student credit card are also the same as using a regular credit card. Perhaps the main one is that if you do not keep up with your repayments, your credit rating could be damaged, and this may make it difficult for you to borrow again in the future. However, used correctly it will help you build up a healthy credit rating, and this could open you up to some of the best deals on the market later in life.

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Only you can decide whether applying for a student credit card is the right move for you, but we hope we’ve made these products a little less of a mystery.

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Know if you're accepted before you apply with QuickCheck

  • Get credit - up to £1,500
  • QuickCheck won’t affect your credit rating
  • Get a fast response in 60 seconds
Check Now 34.9% APR Representative (variable)
Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender