Credit cards don”t have to be a fast-track to doom and debt. Use them to work for you and you”ll reap the benefits. Here”s how to be fantastic with plastic.
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What is a credit card?
Quite simply, a credit card is a tool for delaying payment for the stuff you buy.
The credit card company lends you the money, and you pay them back at a later date, typically with additional interest. As with most loans, the amount of interest you pay increases depending on how long you take to repay.
But, pick the best credit card and it could be 0% for several weeks (or even months), which in turn helps with budgeting. There are other key benefits too, as we”ll explore below, without neglecting the pitfalls.
What is a student credit card?
A student credit card caters for college and university students who don”t have the income and credit score needed to be approved for a normal credit card.
Student credit cards usually have lower credit limits, higher APRs and they tend to offer fewer rewards.
However, used in the right way, student credit cards can be a great way to manage your finances and build your credit score.
What”s in this guide?
Benefits of a student credit card
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There are five key reasons to get a credit card:
Section 75 protection – Pay for items costing over £100 with a credit card and Section 75 protection means the credit card company will refund you if something goes wrong. You can even just pay a deposit by credit card to be eligible to claim for things like repairs, a retailer going bust, non-delivery, cancellation and fraud.
Credit cards can be useful, but they”re not for everyone. If you struggle to manage your personal finances, we”d advise against getting a credit card. Only use a credit card when you can manage the repayments.
Things to consider when applying for a credit card
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Should you get a credit card? Here are the things you should consider before applying for one:
Repayments – Never spend more than you can repay within the 0% interest period.Credit card applications – Don”t make multiple applications too close together, as this can affect your chances of being accepted. Pick one card that not only delivers what you need, but also that you believe you”d be accepted for.T&Cs – Make sure you understand the terms and conditions of any promo deals, including minimum spending or repayments.Penalty charges – Check all the penalty charges associated with using the card, including going over your credit limit, spending abroad or withdrawing from cash machines (although you should avoid all these things anyway!).
Should you get a normal or student credit card?
Credit cards designed for students don”t usually offer great rewards, but you may have more chance of getting one. They come with smaller credit limits (minimising your chances of stacking up lots of debt) but tend to have higher APRs, so can be costly if you don”t clear your balance in full.
What happens to your student credit card after graduation? Well, it won”t magically disappear – you”ll still be able to use your card, but if you”ve used it responsibly, you might be able to move onto a normal credit card.
Standard credit cards open up your options in a couple of ways. If you”re ultra-disciplined, a 0% purchase card gives you a window of interest-free spending. You could do all your regular shopping on a 0% card while letting your own funds build up in a savings account (earning you a bit extra in interest).
That said, it”s still important to only buy what you have the cash for, and to keep that money safe until you need it to clear your balance. The aim of the game is to always repay in full before the interest kicks in. In other words, always make sure you plan ahead.
If you like the idea of rewards, a cashback or points card can earn you anything from money back to air miles and store vouchers and can be worth it if you”re loyal to one store or supermarket.
Again, rewards are only valuable if you”re scrupulous about clearing your balance in full each month. Otherwise, any extra charges, penalties (or fees for paying by credit card) could wipe out any gains.
Best credit cards
Whether you”re accepted for a student or standard credit card depends on a number of factors (such as your credit score), so you”ll need to check out the small print for yourself.
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 there may be some waiting involved.
Student credit card comparison
|18.9%||£500||– Online/mobile banking- Eligible for Visa offers- Can be used abroad- Up to 56 days interest free on purchases||– Must have HSBC student account|
|18.9%||£500||– Online/mobile banking- Up to 56 days interest free on purchases||– Must have Natwest student current account|
|18.9%||£500||– Online/mobile banking- Up to 56 days interest free on purchases||– Must have RBS student current account|
|19.9%||£1,000||– Online/mobile banking- Up to 56 days interest free on purchases||– Must have TSB student account- High APR|
Please note that but the exact terms of your card such as the credit limit will be determined by the bank based on your financial circumstances – they may differ from the term in the table. Please check the terms for yourself before making any decisions.
And if you”re after more options, have a look at some comparison sites like MoneySuperMarket.
How to manage credit card spending and repayments
These tips will help you manage your spending with a credit card:
Only buy things you can afford – Don”t treat credit cards like an easy-access loan. Only use them to buy things if you”re sure you can cover the repayments.Pay your statement balance in full – Always try to pay off your credit card bill in full each month. Only ever making the minimum payment is a false economy, as it”ll take longer to clear your balance and make your purchases cost even more.Never withdraw cash on a credit card – You could be charged a higher interest rate than you”d get on purchases, as well as a handling fee. Either way, it”s going to cost you – so don”t do it. If you want to transfer cash available from your credit limit into your current or savings account, ask if the card company offers a money transfer service instead. Check the terms carefully, though.Don”t forget about your credit card – The jury”s still out on whether getting a credit card but not using it will do anything useful for your credit score. However, tucking it away and forgetting about it isn”t great for fraud prevention.You only need one credit card – Any more than that and it just gets stressful.
While you”re taking the time to shake up your finances, check out our pick of the best app-based banks and see how they could help you manage your money.
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Selecting a credit card can be tricky, especially with all the jargon they use to bring you in. Our jargon buster will help you understand the words the bank use, so you know exactly what you”re signing up for.
0% introductory rate
If there”s a 0% introductory rate, this means that, during the initial introductory period after taking out the card, you won”t be charged interest on the outstanding balance. It”s possible you”ll be required to make a minimum payment each month.
This is a percentage calculation of your outstanding balance per year which is typically charged monthly.
For example, 100% interest on a £100 debt means that, after 12 months, interest rates would reach £100 (if the debt isn”t repaid and you weren”t charged for non-repayment).
With each monthly repayment, your debt reduces, which in turn reduces the total you”re charged on interest – 100% of £50 is less than 100% of £100.
This is the most you”re allowed to borrow from your credit card provider, which is shown on your statement. This limit will depend on your credit score.
The current amount of money you”re borrowing from the credit card provider, shown on the statement. Interest is normally charged on this each month.
APR is short for annual percentage rate, and this is simply the estimated cost of borrowing money (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”d need to pay.
If you have an outstanding balance on a credit card or loan, a balance transfer card lets you put your debt on a special type of credit card. Even with 0% interest offers, you”ll likely be charged a fee for transferring.
The key to happy credit is knowing how it works and using it responsibly. Only take on what you can cope with and always what you can afford to repay. Follow these two rules and you won”t go far wrong.
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