A number of student accounts come with a credit card, typically offering a limit of £500.00. Many of these might offer up to 56 days interest-free, but that isn’t a long time. What it means is that, if you haven’t paid your balance within that timeframe, you will begin to incur interest on your balance owed. Interest rates are typically 18-19% on student credit cards but could even be higher! However, there are benefits and downsides to any student credit and you should be completely aware of them before you decide whether to take one out and whether to spend on it!

Advantages

• Student credit cards typically have low credit limits preventing you from getting into excessive levels of debt.
• Many student credit cards will come with deals and discounts on certain purchases. This can mean that, providing you pay the purchase off within the interest free period, it can work out cheaper to make purchases on your credit card.
• Using a credit card (rather than a debit card) protects you under Section 75 of the Consumer Credit Act. What this means is that if you make purchases over £100 and something goes wrong, the card provider will refund you.
• You can actually build up a good credit history by using a credit card responsibly and paying your balance in time.

Disadvantages

• The monthly minimum repayments on student credit cards are generally higher than on other credit cards. Students, with no full time income, can be considered riskier borrowers.
• Failing to meet your monthly repayment regularly will have a negative impact on your credit rating.