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Which student credit card?
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Student Credit Cards
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Managing a budget when you’re a student is never easy. Not only do course fees, accommodation costs, study material prices and (occasional) grocery shopping trips all add up, but the weekly alcohol bill can cause financial outlays to skyrocket!
Although applying for a student credit card may be a useful short-term strategy for those who are struggling to make ends meet, it makes more sense to go through your budget with a fine toothed comb first and highlight areas where you can tighten your belt. Most student cards charge a higher than average level of interest.
In the long-term, it’s both cheaper and easier to use savings or a student loan to get you through the study years. Most banks offer a 0% overdraft facility as part of a student account, which can be your best friend during leaner periods.
Banks and credit card companies have a habit of targeting students who they see as perennially poor and in need of money. Prove them wrong by managing your budget and spending wisely.
If you feel that a student credit card could benefit you, and sometimes they can come in handy, then shop around and find the best deal for you. Don’t just settle for the card that comes with your student bank account.
We present an overview of some of the best student credit cards.
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Card types
- Student specific cards – These cards are designed with the student in mind, but in 99.9% of cases you need to be an existing customer of the bank that provides them in order to qualify. The exception to this rule is the Barclaycard student card (www.barclaycard.co.uk) , which is open to everyone.
- Adverse Credit Cards – These cards are geared towards people with poor credit ratings. As students are on low incomes and are likely to have their applications for standard credit cards rejected, then adverse credit cards work as a viable alternative. Adverse credit cards come with especially high levels of interest, and should therefore only be used in emergencies. Always be sure to pay off the full balance at the end of each month.
- Prepay Credit Cards – Prepay cards can be topped up before you use them, and are ideal for students on a tight budget who require the functionality of a credit card (for online purchases etc.).
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Student Credit Cards
Barclaycard Student Credit Card
- 14.9% APR
- Maximum limit subject to status
- No annual fee
- Free SMS reminders at billing time
- Free vouchers to redeem against Argos Student Essentials range
Natwest/RBS Credit Cards
- 18.9% APR
- Up to £500 credit limit
- No annual fee
- Discounts on various sites
- Minimum Repayments of 2.25% or £5
- In order to qualify for this card you need to hold a Natwest Student Current Account.
The Halifax Student Credit Card
- 17.9% APR
- Maximum £500 credit limit
- Free SMS reminders at billing time
- Discounts on a range of well known brands
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Adverse credit cards
Capital One Classic Credit Card
- 29.9% APR. This card is aimed at people with a poor credit rating; hence it carries a high level of interest. The card must be used sensibly and the balance paid off at the end of each month.
- Although the credit limit is set relatively low, you can increase it by staying within the credit limit and making payments on time. By your fourth statement, you will be permitted to increase your credit limit.
Vanquis Credit Card
- 39.9% APR. This card is aimed at people who have been refused a standard credit card; hence it carries a high level of interest. The card must be used sensibly and the balance paid off at the end of each month.
- The credit limit is assigned at a fixed amount to help you stay in control.
Aqua Credit Card
- 35.9% APR. This card is aimed at customers who present a risk to the credit card company; hence it carries a high level of interest. The card must be used sensibly and the balance paid off at the end of each month.
- This card carries a credit limit of up to £2200
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Case study
The table below shows the amount of first year interest you would pay after spending £500 on a credit card. The figures are based on the premise that you made purchases totalling £500 on the first day your account was activated, and then made no further purchases. Also assumed is that you only made the minimum payment at the end of each month.
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Prepay Credit Cards
A prepay credit card is the perfect option for those of you who are unable to be accepted for a card, or don’t want to carry the burden of crippling interest payments.
Prepay credit cards are loaded with cash before you use them, and you’re only permitted to spend as much as you have loaded the card with.
A standing charge is paid each month, and then a percentage of each transaction on top, but this can still work out cheaper than paying interest on a credit card. Also, you might want to ask your parents to top the card up from time to time perhaps?
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Our Recommendations
- Keep your spending in check, and question whether you really need a credit card. Could you live without it? If the answer is yes, then make the most of your savings and an interest free overdraft instead.
- If you simply require a card for buying on the net, then a prepay credit card is best.
- If you’re struggling for cash then apply for the Barclaycard student card (www.barclaycard.co.uk) , and pay off as much as you can each month.
- Only in extreme circumstances should you consider getting an adverse credit card. The interest repayments on these cards could financially cripple you way beyond your student years.
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