A guide to choosing the best credit cards for students

Student bank account overdrafts can be a major win for your finances if you use them right. That’s because most of them don’t charge you interest or an annual fee during your studies. Result!

But if you’re temporarily short of cash because you’re waiting for your grant, loan, or pay to arrive, it might be smarter to use a student credit card to tide you over. Why? Go past your overdraft limit when things are really tight and you might get stung with an interest rate of up to 39%.

Many of the best student credit cards charge you a lot less in interest, so it could save you some money when times are tight..

What is a student credit card?

Let’s start with the basics.

Credit cards let you buy things today even if you don’t have the dosh to pay for them right now. You do have to pay it back later though—with interest. Boo!

Always use credit cards responsibly, it’s not “free money”, and it comes with a risk of debt  if you fail to keep up with your monthly repayments.

Student credit card balances and limits

Every time you buy something with the card, your spending balance (i.e the money you owe) goes up. Every month, you make a repayment and that brings the balance back down.

Remember: the closer your balance is to your limit, the less you can spend on your card.

What a student credit card will cost you

Your credit card provider has the cheek to charge you for buying stuff with your card. *Inconvenient*, we know.

Let’s look at how they do this.

It’s really important to know that your credit card provider expects you to pay them at least some towards your balance every month.

These are your options:

• Full payment: this is when you pay back your balance in full. Doing this means you swerve paying interest—which is a win!
  
• Partial payment: this is when you pay some, but not all of the balance. What’s left is carried over to the next month and you pay interest on that
  
• Minimum payment: this is the lowest amount that your credit card firm will accept

The most sensible way to use a credit card is to pay off your balance in full every month, it’ll also do wonders for your credit score!

How does this work in the real world? Let’s take a look.

Let’s say that your balance is £1,000 and your interest charge is 20% APR. Your provider might want you to make a 5% minimum repayment each month.

If you did that, it’d take you 2 years and 1 month to clear your balance. The interest would cost you £203 over that time.

But if you decided to pay off £100 a month instead, you’d have a zero balance in 11 months and the interest would cost you £94. A £109 saving!

So, why is that?

It’s because of the interest. The more you pay off, the less interest gets added to your balance. By only making the minimum payment, interest piles up, meaning you’ll have to pay more over time. Less than ideal, right?

There may be other fees, too, like an annual fee for simply just owning the card. That’s a cost you’ll pay even if you never spend a penny on your credit card.

If you don’t have enough funds in your current account when the credit card instructs your repayment direct debit, there might be a charge there too (depending on the provider).

Perks of a student credit card

Many of the best credit cards for students include:

• No annual fee
• Interest-free period
• A higher chance of being approved than with a standard credit card
• Rewards like cashback, cheaper railcards, and loyalty points
• The chance to build your credit rating for cheaper loans and mortgages later in life—major slay!

However, it is worth noting that the limits on student credit cards are often lower and the interest rates higher.

Who can apply for a student credit card?

Let’s get some myths about student credit cards out of the way first.

Worried you’ll be turned down flat if you apply for one of the best student cards? Having no credit history is a worry that could stop you from applying for a card, for example. Don’t fret, having your student credit card application accepted is actually really common, the providers are happy to help you out right now, hoping they’ll win your loyalty in the future.

When you apply for a student credit card, you’ll need to show that you have a regular income.

That might be the money you get from your family or a job. They’ll be happy with either of those but, unfortunately, they won’t count your student loan as income.

Are you an international student? You still have options available to you.? You can apply for an international student credit card in the UK. Not all banks offer them though so you have to shop around.

Keeping your spending under control with a student credit card

When cash is tight, credit cards can be handy short-term for stretching out your student loan.

You’ve got to be careful with them, though. Here’s some handy advice for using a student credit card:

• Avoid ATMS: Don’t use your credit card to take out cash from the hole-in-the-wall. You’ll get whacked with a cash advance fee and pay higher interest on it than standard purchases.
  
• Don’t go over your limit:. If you try to buy something that will push you over your credit card limit, sometimes the card won’t let you.. Other times, they’ll let the payment through and you’ll find yourself with hefty fees and charges.
  
• BNPL can be cheaper: rather than using a credit card, consider a buy now pay later (BNPL) service instead. Buy on BNPL and there’s often no interest. Beware though, BNPL providers have strict repayment timetables you must stick to that are less flexible than a credit card.
  
• Higher repayments = good: lower repayments = bad for your balance in the long term. Aim to pay off as much as you can each month. If you can pay it all off, even better—no interest fees!
  
• Set up a Direct Debit: most providers will insist on this but set one up even if they don’t. Missed payments cost money and look bad on your credit report, and with an automatic payment set up, you don’t have yet another thing to remember. Always make sure there’s cash in your account to meet the payment, though!
  
• Extra purchase protection: if you spend over £100 on a damaged product on a credit card, Section 75 of the Consumer Credit Act is your knight in shining armour! That’s because that particular legal gem guarantees you a full refund.
  
• Don’t hide: We get it, reviewing your balance regularly can feel pretty uncomfortable, especially when times are lean. But, it's better to be in the know and therefore in control. Be smart and review your spending regularly!