Student Credit Card UK Guide

Keeping track of your finances as a student can be tricky, especially if you’re struggling to find a part-time job or can’t fit one in on top of your studies. While your student loan will usually cover basic expenses, you might be keen to have a little extra cash for emergencies or to pay for the occasional treat. This is where a student credit card can come in handy.

Many people like to steer clear of credit cards as they can lead to bad debt problems. If you’re responsible when using one and repay your monthly payments sensibly, a credit card – especially for a student – can be an excellent financial tool.

What is a credit card?

This may sound like a silly question, but it’s crucial to know what a credit card is so you can decide if it’s the right thing for your needs.

Put simply, a credit card is a card issued by a bank or lender which allows you to borrow money to pay for goods or services. The money you use isn’t yours. It belongs to the bank or lender. You’ll need to pay back whatever you use, typically in regular monthly instalments.

There’s a variety of reasons why people decide to apply for a credit card. As a student, you might need one to help cover any costs you might have between being paid for casual or part-time work. A credit card can also help bridge the gap between student loan payments and be a valuable way of spreading the cost of more expensive essential items. 

This guide will focus specifically on student credit cards. For more information on regular credit cards, you can visit our detailed credit card guide.

Can a student get a credit card?

If you thought you had to be in full-time employment to get a credit card, you’d be wrong! Many banks offer student credit cards – products with specific terms and benefits for those who are studying. What’s more, unlike regular credit cards, applying for a student credit card does not require you to have an existing credit score.

Wondering what a credit score is? This is a number or rating used to see how likely you are as an individual to pay back any money you borrow. It’s usually expressed as a 3-digit number and is used to assess how risky you are to lend to. Later in life, you’ll find credit scores are used for numerous things, from mortgage applications to signing up for a mobile phone contract. 

How do student credit cards work?

Just like regular credit cards, student credit cards work by allowing you to delay payment for items or services. The bank or credit card company will loan you an agreed amount every month, and you’ll then pay this back in instalments.

Interest is also added on top of this, with different lenders offering different rates. Note that you’ll only pay interest on your student credit card if you fail to pay off the amount you’ve spent when you’re billed at the end of the month.

To help get your head around credit card payments, let’s look at an example. Say your credit card limit is £1,000. You spend this, but you only manage to re-pay £800 by the end of the month. The extra £200 you owe will roll over to the following month, plus interest on that £200. 

The benefits of student credit cards

Beyond the obvious fact that you’ll have access to more money when you need it, student credit cards can also have various other perks.

1. They’re a great way of building up your credit score

As a student, you’ll have little to no credit history. This may become an issue once you start work and apply for things like a mortgage or a regular credit card. By having a student credit card that you regularly use and pay off on time, you’ll be leaving a digital trail of proof that you’re responsible with money.

2. They give you additional protection when buying items or services

Unlike debit cards, credit card purchases are protected under something called the Section 75 Consumer Credit Act

This means that if you spend more than £100 on something that’s faulty or doesn’t arrive, the retailer and the bank you’ve taken out your credit card with are liable to cover the cost. The Consumer Credit Act also covers things like holidays or rentals. The bottom line? You’ll be guaranteed a refund and won’t be left out of pocket.

3. Student credit cards can have additional rewards

Many student credit cards have a host of extra perks, such as giving you discounts at well-known retailers or offering cashback deals. These can be valuable for students with little money to spare. Nevertheless, it’s important to remember that these rewards should not be the main reason to choose a specific card.

4. Can help improve your budgeting skills

Most students have never had to be in charge of money before – and lots struggle to stick to budgets! While having a student credit card gives you access to extra cash, it’s also an ideal tool for learning how to manage your finances. 

All credit cards have monthly spending limits, plus you’ll need to plan how and what you spend to make sure you’re able to make your repayments. 

Potential risks of a student credit card

While credit cards are a helpful way to pay for things, they can also lead you into debt if you consistently fail to make your monthly payments. You’ll end up paying back more than you were loaned because of interest. What’s more, you could end up with a bad credit score.

Student credit cards can additionally come with a few other disadvantages.

  • High Annual Percentage Rates (APR) – this is the annual interest rate (expressed as a percentage) which you’ll pay in monthly instalments for money that you’ve failed to pay back in previous months

  • Lower credit limits – compared to regular credit cards, ones for students usually have lower lending limits (meaning you’ll have less money to spend)

  • Hefty fees – you might be charged high costs if you decide to use your credit card to withdraw cash from a cash machine or if you use it abroad

Nevertheless, there are some perks of student credit cards. They can be fantastic options for those who are responsible with (or want to learn about) money.

Applying for a student credit card

If you’re keen to get a credit card to see you through your student years, you’ll need to pass the following criteria.

  • You must be over the age of 18

  • You must be attending college or university 

  • You must be living in the UK

  • You must have a UK bank account

Once you’ve ticked all of these boxes, your student credit card application should be relatively straightforward. Some banks will only let you take out a student credit card if you already have a student bank account with them. This is true of HSBC, NatWest, TSB, and RBS.

You’re less likely to qualify for a student credit card if you already have a bad credit score. Bad credit scores can be caused by many things, from failing to make payments on a credit card or overdraft to being financially linked to someone who has lots of debt.

Having no credit score also puts many banks off giving people credit cards.

Paying back your student credit card

One of the most important things you should consider when applying for a student credit card in the UK is how you’ll pay it back.

Credit cards have a minimum monthly repayment, which your bank or lender will tell you when applying. You must meet this amount every month, although, ideally, you’ll want to pay back the total amount of whatever you’ve spent on your card. Typically, your credit card repayment date will be the same every month, making it simple for you to set up a direct debit. 

A direct debit is something you can set up through your bank or building society. This authorises them to make a payment for a specific amount on a certain date. Setting up a direct debit for your credit card is an excellent repayment option if you spend the same amount every month. If the amount fluctuates, you may want to make your repayments manually. 

To help make sure you don’t forget, it’s a good idea to set up a reminder on your phone or tablet. Some banks will also text you the week before your payment is due to give you a heads up.

The best student credit cards in the UK

Now you know a bit more about what a credit card can do for you, it’s a good idea to weigh up your options. There are many places where you can apply for a student credit card, from big-name banks to credit card companies with specific products for students.

Your student credit card spending limit and interest rate will depend on several factors, including your personal finances and your credit history. To find the best student credit card for you, speak to your bank about what they can offer or use a comparison tool online.

Here are some things to look for when applying for a student credit card:

Annual Percentage Rate (APR)

Student credit cards tend to have a higher APR – which is your interest rate for the whole year. These credit cards have a higher APR because students are often considered riskier to lend money to. Nevertheless, you might find one which is still relatively low. If you commit to paying off your credit card in full every month, the APR won’t matter as you won’t need to pay any interest.

Credit limits

A credit limit is how much you’ll be able to spend on your card. The amount can differ, although student credit cards tend to have a spending limit of between £500 and £1,500.

0% periods

Some credit cards will offer 0% interest for a set time rather than an APR. This means you can make larger payments needed as long as you manage to pay off the total amount by the end of the agreed 0% period. This type of deal is better if you need money for a one-off, big purchase such as a new laptop or a car. 

Penalty charges

When applying for a student credit card, check for penalty charges for things like going over your spending limit or using your card abroad.

Many student credit cards can be applied for and managed entirely online or on an app, making it simple to stay on top of payments and keep track of what you owe.

Other ways to fund yourself as a student

As well as applying for a student credit card to help fund certain expenses during your university years. Here are some things you might like to consider:

A student loan

As well as applying for a student loan to cover your tuition costs, you can also apply for a maintenance loan. What you’ll be entitled to will differ depending on where you are studying and your family income. As it is a loan, you’ll need to start paying it back to Student Finance once you’re earning over a certain amount.

A student overdraft

Most student bank accounts include a 0% overdraft. This is when you can withdraw or spend money you don’t have without paying any fees or interest. You’ll set your overdraft limit with your bank, and you’ll need to make sure you don’t go over it or face costs.

A part-time job

One of the best ways to make a little extra cash while studying is with a part-time job. This could be in retail, hospitality, or getting a job that uses your degree skills.

If you’ve not applied for a credit card before, it might help to check out our first card credit guide for advice. It details what the process involves, plus you’ll spot some handy tips on improving your credit score.  

6 May 2021