Credit cards don't have to be a fast track to ruin and debt. Put them in your place and you will reap the benefits. Here's how to be fantastic plastic.
The world of credit cards can seem a little intimidating. Especially since there are horror stories about getting into debt using them. But they can actually be amazing tools to help you budget and boost your credit score if you use them right.
Students often have trouble getting a regular credit card because they don't have the required credit history. Fortunately, however, there are student credit cards.
To help you make the right decision, we'll go over the top things to know before getting a credit card. The following information includes how to manage your refund as well as a list of the best credit cards for students.
What's in this guide?
How do credit cards work?
Why should you get a student credit card?
Things to consider when applying credit card
Which type of credit card is better?
The best credit cards for students
How to manage credit card spending and payments
credit card jargon
How do credit cards work?
In short, a credit card is a tool to defer payment for your purchases.
When you buy something, the credit card company gives you money. He then returns them later. As with most loans, the amount of interest you pay increases with how long it takes to pay.
Some credit cards have 0% interest for a few weeks (or even months), which in turn helps with budgeting. There are other major benefits that we'll discuss below, not to mention pitfalls.
What is a student credit card?
A student credit card caters to college students who do not have the necessary income and credit score to be approved for a regular credit card.
However, student credit cards have some drawbacks. They typically have lower credit limits, higher APRs, and generally offer fewer rewards.
However, if used correctly, student credit cards can be a great way to manage your finances and build your credit score. Doing so will help you later in life when you want to buy a home or apply for a credit card with better rewards.
Benefits of a student credit card
There are five main reasons to get a student credit card.
- Credit account. Credit cards can improve your credit score if you manage them . You'll need a decent credit history to get financial products (like a mortgage) later in life. The better your score, the better offers you will be offered.
- Section 75 protection – Paying for goods worth between £100 and £30,000 with a credit card and having Section 75 protection means that the credit card company will reimburse you if something goes wrong. You can even pay a credit card deposit to be eligible to claim things like repairs, retailer bankruptcy, non-delivery, cancellation and fraud.
- Money management skills. learning how to properly manage your credit card account teaches you important personal finance skills that can also improve your situation in the future.
- Rewards – Like student bank accounts, credit cards are often loaded with discounts and rewards. As long as you have a stable payment plan, you can make money.
- Emergency measures. can also be used for emergency funds while you wait for your next Student Loan repayment. However, there are other lower-risk financing methods you can try first. These include your first 0% overdraft, a part-time job, some money from your parents, or your college emergency funds.
Things to consider when applying for a credit card
Should you get a credit card? Here are the things to consider before applying for one.
- Returns: Never spend more than you can afford during the 0% interest period.
- Credit Score – Check your credit history before applying. If necessary, you can take steps to improve your score.
- Credit card applications. do not submit multiple applications too close to each other as this may affect your chances of being accepted. Choose a card that not only gives you what you need, but also one that you think will get you accepted.
- Annual Percentage Rate (APR) – Check the APR (this includes interest and additional fees). This shows how much extra money you'll be charged if you don't pay your balance in full each month. If you're a little rusty on your banking jargon, let's explain what an APR is.
- Terms and Conditions – Make sure you understand the terms and conditions of any promotional offer, including minimum spend or discounts.
- Payment of fines. Check all the penalties associated with using the card, including going over your credit limit, spending abroad or withdrawing money from ATMs (though you should avoid all of these things anyway).
Should you get a normal or student credit card?
Student credit cards don't usually offer great rewards, but you may be able to get a better deal. They come with smaller credit limits (which minimizes your chances of racking up a lot of debt), but tend to have higher APRs. That means it can be expensive if you don't pay off your balance in full.
Standard credit cards open up your options in several ways. If you're extra disciplined, a 0% purchase card gives you an interest-free spending window. You can make all your regular purchases with a 0% card while letting your own funds accumulate in a savings account (earning a little more interest).
That said, it's still important to only buy what you have cash for and keep that money safe until you need it to pay off your balance. The goal is always to pay in full before interest accrues. In other words, always plan ahead.
If you like the idea of rewards, a cash or points card can earn you anything from cash back to airline miles to store coupons. It might be worth it if you are loyal to a store or supermarket.
Again, the rewards are only valuable if you're meticulous about paying off your balance in full each month. Otherwise, any additional charges, penalties (or credit card fees) may void any winnings.
What happens to your student credit card after graduation?
Well, it won't magically disappear. You will still be able to use your card as normal. But if you've used it responsibly, you can switch to a regular credit card with better interest rates and rewards.
Best credit cards for students 2022
Whether you're accepted for a standard or student credit card depends on a number of factors (for example, your credit score). You should check the fine print .
Some banks also won't offer a student credit card as an option until you've had a student account with them for a few months, so it might be a wait.
Student credit card comparison
|– Online/mobile banking
– Eligible for Visa offers
– Can be used abroad
– Up to 56 days interest free on purchases
|– Must have HSBC student account
|– Online/mobile banking
– Up to 56 days interest free on purchases
|– Must have TSB student account
– High APR
Please note that the exact terms of your card, such as the credit limit, will be determined by the bank based on financial circumstances. They may differ from the term listed in the table. Please check the terms yourself before making any decisions.
And if you're looking for more options, check out some comparison sites like MoneySuperMarket.
How to manage credit card spending and repayments
These tips will help you manage your credit card spending.
- Buy only what you can afford. Don't treat credit cards like easy loans. Only use them to buy items if you're sure you can cover the discounts.
- Pay your statement balance in full. Always try to pay your credit card bill in full month. Simply making the minimum payment is a false economy because it will take longer to clear your balance and make the cost of your purchases much more expensive.
- Use direct debit. set up a direct debit from your checking account to automatically pay your credit card balance (or any other amount). Just make sure you have enough cash (or an interest-free overdraft) in your checking account.
- Pay what you can. If you can't pay off your balance in full, you must pay as much as you can from your account. Failure to make minimum payments can affect your credit score and may also result in penalties.
- Buy high-value products with a credit card. This is because purchases worth between £100 and £30,000 will be covered under the retailer's Section 75 bankruptcy protection, or your item is not as expected. It can help with things like summer vacations, concert tickets, and new gadgets. It's a good idea to pay directly with your credit card to get S75 protection (ie not through PayPal or other payment services).
- Get the most out of credit card rewards. Looking for rewards points, cash back or airline miles? To collect better bonuses, it may be worth using your credit card for everything, while your service loan, salary or other income sits firmly in your savings account, earning extra interest. Just make sure you have cash to cover your expenses.
- Never withdraw cash with a credit card. You may be charged a higher interest rate than you would receive at the time of purchase, as well as a handling fee. Either way, it will cost you, so don't do it. If you want to transfer available cash from your credit limit to your checking or savings account, ask if the card company offers a money transfer service. However, please review the terms carefully.
- Don't spend more than your credit limit. you will face penalties when you do. Keep track of your expenses, especially at the end of the month. In addition to spotting potential fraud, you can see at a glance whether you're sticking to budget, when you're due, plus any rewards or interest you're collecting.
- Don't forget your credit card. the jury is still out on whether getting a credit card but not using it will benefit your credit score. However, save and forget is not good for fraud prevention.
- You just need a credit card and it becomes stressful.
Credit card jargon
Choosing a credit card can be tricky, especially with all the jargon they use to lure you in. Our slang translation will help you understand the words used by banks so you know exactly what you're signing up for.
0% introductory rate
If there's a 0% introductory rate, it means you won't be charged interest on the outstanding balance during the initial introductory period after taking out the card. You may be required to make a minimum payment each month.
If you don't pay your credit card bill in full (unless you're in a 0% introductory rate period), you'll be charged interest on the remaining balance. This is usually billed monthly. With each monthly payment, your debt is reduced, which in turn lowers the total interest you are charged.
This is the maximum you can take from your credit card provider listed on your statement. This limit will depend on your credit.
Your outstanding balance is the current amount of money you owe from your credit card provider as shown on your statement. Interest is usually charged on it every month.
APR is short for Annual Percentage Rate, and this is simply the estimated cost of the loan amount (interest + fees). Not everyone will be offered the same rates for their credit card, but the Representative APR is there to give you a general idea of how much you might be paying.
If you have an outstanding credit card or loan balance, a balance transfer card allows you to put your debt on a special type of credit card. Even with 0% interest offers, you will likely be charged a fee.
The key to happy credit is knowing how it works and using it responsibly. Only take what you can afford and always what you can afford. Follow these two rules and you won't go wrong.
Not ready for a credit card yet? Check out the best online and app-based bank accounts that can help you budget better.