Credit Cards

¹Many banks offer students credit cards when they sign up for their student bank account. This section outlines some of the things you need to look out for if you are considering taking out a credit card.

What is a credit card?

While there are a multitude of credit cards to choose from, there are only four main companies supplying the cards. The four main companies are: Visa, MasterCard, Diners' Club and American Express.

Choosing a credit card

There are four main areas of variation between the different cards; you need to consider these very carefully before choosing a credit card.

• Annual fees - are the first area to consider, not all credit cards charge you an annual fee, and so a little shopping around could save you a lot of money in the long run.
• The interest-free period - this is another feature to look out for. This is the period between which you buy an item using the card, and then start paying interest on that money. For most credit cards this will be about 30 days (sometimes more), normally you would receive the next bill in that time, so if you pay it off straight away you will not pay any interest.
• The interest rate (also known as Annual Percentage Rate - APR) - the difference between the APR on different credit cards is minimal, with almost no difference between the various cards offered. See the section on comparing credit cards to work out the best deal for you.
• Purchase protection - this is the final item that is worth looking at when considering a credit card. This is basically a form of insurance offered by the credit card companies on the items bought with the card. If something happens to that item within the specified time period (normally 30-90 days), the credit card company will replace the item.

Credit card tips

Credit cards can be useful in an emergency, for example, if your student loan is delayed or if you have some unexpected expenses. If used sensibly a credit card can be a good way to build up your credit rating whilst studying. It is misuse of credit cards that cause some students to get into debt, not the fact of having a credit card itself. Here are just a few tips on how to get the best out of your credit card, and how to save yourself money when using it.

• Pay your bill on time - this way you wont have to pay interest on your purchases, and you will avoid any "late payment" charges that the card issuer may charge. If you find it hard to remember to pay bills, consider paying by direct debit.
• Always pay off your outstanding balance in full - if you don’t have the money to pay off your credit card balance you will begin to accumulate interest charges on the balance of your account.
• Do not use cash advances - many credit cards are sent out with a PIN number allowing you to use it in a cash machine, but this can be very expensive. Many issuers charge you extra for this service, either a percentage of the money you have taken out, or a flat fee (often whichever is higher).
• Remember credit cards are one of the most expensive ways to borrow money - with high interest rates compared to other methods available, using a credit card can be very expensive. The example here shows the cost of borrowing £500 for a year using three different methods:

As you can see, the credit card comes out by far the most expensive, so you would do far better talking to your bank, and making use of the overdraft facilities they offer.

Compare credit cards

Managing your finances as a student can be a challenge. A credit card can be a useful tool in doing this, although it is important to keep a close eye on what you spend, because the standard APR interest on a student credit card will generally be higher. However, there are a few credit cards designed specifically for students, which provide incentives such as discounts and vouchers to make your life easier.

Where to get help

Related links

 Consumer Direct

 Money Made Clear

 Welfare & International Support