From covering an unexpected expense to providing you with funds before your loan comes in, a student credit card can be useful. However, if you’re considering taking out a student credit card, there are some things you need to think about and be aware of before you do.
Know your limit
When you take out a student credit card, you’ll be given a credit limit. This is the most the lender is prepared to extend to you. Your credit limit will depend on a number of factors, including the provider and your financial history. It’s important to know your credit card limit and not to go over this amount as this could affect your credit history and mean you may have to pay extra fees and interest.
Use it sensibly
It may sound silly, but you need to think about whether you’ll be able to use your student credit card responsibly. Anything you spend on your credit card will need to be paid back – whether that’s uni supplies, food or a round of drinks for your friends – and you may find it tempting to spend once you have the credit card.
Make the repayments on time
One of the biggest considerations to make when taking out a student credit card is whether you can afford to make the repayments. If you miss one, you could lose certain benefits or have to pay a late fee and this may affect your credit score.
Some student credit cards may require you to pay the full balance of your card each month while others may only need you to repay a minimum amount. Paying back more than the minimum amount can help bring your credit card debt down quicker. It can also reduce the amount of interest you pay so it’s worth always trying to repay as much as possible.
Build your credit history
While you may not have much of a financial history yet, that doesn’t mean you can’t start working towards having a good credit score for the future. A student credit card which is used responsibly and where repayments are made on time can help show potential future lenders that you may be a good person to lend to.
Get protection on bigger purchases
If you plan on using a student credit card for a purchase costing between £100 and £30,000, you’ll be protected under ‘section 75’ of the Consumer Credit Act. This can be useful if a company fails to provide the goods or services agreed, or the goods are not up to a good standard. It can also be useful if the goods or services were misrepresented.