Credit Cards for Students: The UK Best

Managing income and spending as a student can be tricky, and you might be considering using a credit card while you are studying.

A student credit card can be used for larger purchases, for careful and essential spending, or to build credit history for your future – but there are a few things that you need to consider before taking the leap.

What Is a Student Credit Card?

A normal credit card allows users to make purchases and then pay for them later – either in a lump sum or over a period of months.

The amount that can be spent depends on your credit limit – which is usually calculated based on your credit history and affordability.

Credit cards have an income requirement to ensure that repayments can be afforded. That is part of the responsible lending rules that credit companies must adhere to.

Student credit cards are slightly different, as they are designed to help establish a credit history. Eligibility criteria are not usually as stringent, as they need to consider that young borrowers will not have had any credit before.

Student credit cards also require lower annual income in most cases, as they are aimed at young people who may be reliant on student loans or part-time jobs.

What this means is that the rates for these cards are not usually as preferable as a standard credit card, but the cards are easier to obtain.

Student credit cards will usually have a lower credit limit to help manage spending and reduce repayments, and a higher APR (Annual Percentage Rate) – meaning that not paying off any spending before the statement date will incur interest at a higher-than-usual rate.

To be eligible for a student credit card, most banks ask that applicants are:

• Over 18
• Living in the UK (usually for at least three years)
• A UK bank account holder (sometimes at the same bank)
• Enrolled in a course that is at least two years long at a UK college or university

Different companies may have additional – or different – rules, so be sure to check the details.

While a student credit card is not suitable for all students, a good credit rating is an asset and managing money early in life can put you in good stead for applying for loans, other credit cards and even a mortgage in the future.

This is a double-edged sword, however, as mismanaging credit will mean charges, higher interest and defaults in the short term, and could have long-term implications for your credit history.

Why Get a Student Credit Card?

As with many financial decisions, there are pros and cons to getting a student credit card. Understanding how they can benefit you when used correctly is a good place to start:

To Build Credit Score

Although it might seem strange, never having credit does not give you a perfect credit score. You need to have credit (and pay it back promptly) in order to create a credit history that shows you are responsible and can therefore be trusted with more credit.

This is especially important for life-changing purchases like a house; preferential mortgage rates are reserved for people with a strong credit score.

Purchase Protection

Student credit cards, like other credit cards, offer payment protection for purchases between £100 and £30,000, as described in section 75 of the Consumer Credit Act.

This means that if the product does not turn up, the goods are not as described or if the company has gone bust, you can claim your money back.

This is useful for larger purchases (like a laptop, for example) although may be less useful for a lower credit limit.

Interest-Free Period

Many credit cards offer an initial introductory offer of 0% interest on purchases, but regularly clearing your balance can have even more of a positive impact on your costs.

If you pay off the whole balance by the end of the statement period, many student credit cards will offer you a set period of interest-free time.

This means that you will not be charged interest on any purchases you make in that time – so you will not have any extra to pay back.

Rewards

When all things are equal, it can be the rewards from a credit card that you might find most useful.

These can include exclusive access to discounts at selected retailers, early tickets for gigs or the theatre, loyalty points, or even cheaper travel via railcards.

In some cases, getting a student card could be a savvy decision if the rewards are likely to lessen your costs elsewhere.

Features to Be Aware Of

Not all credit cards are created equal, and even those offered by the same banks or credit companies can have different rates, perks and pitfalls.

Knowing what these could be – and what is important to you – makes choosing the right one much easier.

Fees

There are always fees for using credit, but if you are careful, you can avoid most of them.

These can include an annual fee (although these are becoming rarer for credit cards) and penalties.

Many cards will charge a fee for a late payment or for going over the credit limit.

To avoid fees, make payments on time and don’t max out the credit limit.

Interest

Interest can be a confusing part of a credit card application, as the amount shown may not be the amount you get charged.

Banks and credit card companies will charge interest based on your credit history and affordability – the riskier you are as a credit holder, the more interest you will be charged.

Student credit cards will typically have a higher APR than a standard credit card because students tend not to have any credit history.

The representative APR rate shown for cards is an example based on a certain credit limit and may not reflect the rate you are given in reality.

Credit Limit

Student credit cards will offer a much lower credit limit, at least initially. This makes it much harder for you to overspend but does reduce the usefulness of the card as an emergency fund.

If you manage your repayments well and maintain the credit card properly, most banks and credit companies will increase the credit limit (with permission), so it does pay to be careful about spending.

Rejected Applications

Your credit file is quite delicate and can often be affected by different things that might surprise you. Repeated applications for credit can have a negative effect, especially if they are declined.

In many cases, you can complete a ‘soft search’ as part of the application process for a student credit card. This enables you to see if you would be accepted without it affecting your credit file.

Rewards

Credit companies and banks want to entice you in – and student credit cards are no different. In fact, student cards often offer the most exciting rewards.

While they offer much the same in terms of fees, interest and credit limits, what can set apart a particular card in your mind might be the benefits you get from using it.

From cashback to Clubcard points, railcards to gig tickets, these companies often look for ways to add value to their card – so it is always worth seeing what benefits you can get in addition to the card itself.

11 Best Student Credit Cards

The cards below are all suitable for students as they have less stringent requirements for credit accounts, but only the first four are specifically aimed at students.

Those four student credit cards are only available to applicants with a student bank account, but some students may consider these providers to be more responsible and aware of student finance and loans.

Final Thoughts

Before you decide on the right student credit card for you, it is always worth considering first whether getting credit is the best choice for you.

Having access to a credit card can help with emergencies, but spending on frivolities could see you paying back more in the long run.

Getting a credit card to help build your credit after college or university will help you if you need to get further cards, loans or even a mortgage – but it does require careful thought and consideration.

When choosing a student credit card, it is up to you if you want to select a card that is specifically aimed at students (and tied into student bank accounts) or one from a credit company that looks to build credit.

Make sure that you keep on top of repayments, don’t spend more than you can afford, and you could find that a student credit card may be an investment into your future.

WikiJob does not provide tax, investment or financial services and advice. The information provided is for general reference and you should not rely on it to make (or refrain from making) any financial decisions. Personal situations will vary. Always seek independent financial advice when choosing how to manage your finances.