There are some positives and negatives to do with student credit cards. On the one hand, they can help you learn to budget effectively and improve your credit score, which will be useful in the future. On the other hand, you can get into debt very easily. Therefore, it’s good to do your research into the various student credit cards on offer. While it may seem a little much at first, it can be pretty easy to set up. To help you out, we’ve covered what exactly is a student credit card, how do they work, and which are the best options when it comes to choosing student credit cards in the UK?

What is a student credit card?

What is a student credit card?
Source: Canva

So, an important question to start, what is a student credit card? Well, a student credit card is just like any other credit card but made for students. This means that there are fewer income and credit score restrictions than on a regular credit card. As students are likely to have less or no income and little credit history, student credit cards may have lower credit limits or higher interest rates.

How does a student credit card work?

How does a student credit card work?
Source: Canva

Now that you know what a student credit card is, how does it work? There are four key steps that explain how a student credit card works. 

  1. If you’re accepted for a card, the provider will set a maximum amount that you can spend, known as your credit limit. As a student with little/no income, this will likely be quite low, probably no more than £500. 
  2. You pay for things, just as you would a debit card. Something to keep an eye on is to not exceed your credit limit – if you do, you’ll face fees. While not immediately important, if you want to build your credit score for the future, make sure you use no more than 30% of the limit. This shows that you are not reliant on borrowing. 
  3. Each month, the credit card company will send you a bill for the amount that you owe for the month. It’s important to pay this on time, as you will incur fees and a negative mark on your credit file if you pay this late. So that you don’t forget, it may be a good idea to set up a direct debit so it automatically takes the money from your bank account. 
  4. You’ll need to repay the bill in full each month – if you repay less then you’ll have to pay interest. On your statement, there will be two figures – the minimum payment (the absolute lowest you must pay) and the full amount. If you pay the full amount, there’s no added cost. However, you can pay a lower amount but interest is added to next month’s bill, depending on the total amount that you’ve borrowed. 

 

So, now that you know how a student credit card works, which are some of the best student credit cards in the UK? Here are two great options. 

1. HSBC

Which are the best student credit cards in the UK?
Source: HSBC UK

HSBC’s student credit card offers you an annual percentage rate (APR) of 18.9%. An APR is how much extra you’ll be charged if you don’t pay off your balance in full each month (essentially, lower is better). The credit limit on this account is £500, but your exact limit will depend on your financial situation. It has both online and mobile banking and you can have up to 56 days interest-free on purchases. However, one drawback is that you must have an HSBC student account first.  

2. TSB

Which are the best student credit cards in the UK?
Source: TSB

TSB is another of the best student credit cards in the UK. While the APR rate is higher (21.9%), the overall limit is also higher, at £1000. Again, your exact limit will depend on your individual financial situation. Similarly to the HSBC account, you have both online and mobile banking and can have up to 56 days interest-free on purchases. Again, you must also have a registered student account with them first. 

So if you were wondering which are the best student credit cards in the UK, there’s a few options to consider. Both HSBC and TSB require a student account with them first before you can apply for a student credit card. Therefore, it might be a good idea to check whether your bank offers a student credit card first before opting to look elsewhere. 

Sorting out your finances is just one of the many things you need to do before heading to university. But make sure you check out these other steps to prepare for university life. 

Last Updated on July 4, 2024

Published on July 2, 2024

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