How To Choose The Best Student Credit Cards

How to choose the right Student Credit cards - What to look for and benefits of using student credit cards

Credit card companies offer many types of cards to meet various people’s needs. There are cards such as small business credit cards, corporate cards, and also to cater for students specifically there are Student Credit Cards. There are many benefits in choosing the right cards such as a certain type of card will offer low overseas transaction charges, or some may offer reward points for shopping.

In order to apply for the best credit cards for students, it is important to discuss what student credit cards have on offer. Although they may not have any facilities or extras that may be different to a standard credit card, there are two important aspects that need to be considered namely, interest rate (APR – Annual Percentage Rate) and Credit Limit.

APR for Student Credit Cards

APR is the interest rate that is applicable on the outstanding balance on any credit card.

It is generally higher on student credit cards mainly due to the fact that credit card companies perceive students as higher risk borrowers. On most student credit cards, it is noticed that the lenders attach a higher percentage APR which can be significantly more than standard cards. Therefore, our recommendation would be to not accept it as unavoidable and assess whether simply applying for a standard credit card with a lower credit limit would be a better idea or not. However, standard credit card applications may be attached with stricter terms and conditions.

Terms and conditions for Student credit cards

Some credit card companies might require a guarantor/guardian/parent to sign the credit agreement to guarantee to act as a buffer in case a student defaults on the payments. This may not be the case with all credit card companies so shopping around for less strict terms and looking at terms and conditions before hitting the shiny ‘Apply Now’ button is always a good idea. Lenders may try and put it this way that a student credit card is the only best option for a student, which however, may not be the case, and a standard credit card with a lower credit limit can balance out the risks associated for the credit card companies and as a result you may not be expected to meet very strict terms.

Credit limits for Students

The reason why a lender or may not be willing to issue a higher credit limit for students is purely due to the fact that students may not be able to back their applications with a high monthly fixed income. In this case, it is always a good idea to find the best student credit card company that is willing to take an individual’s circumstances in to account and offer the highest possible credit limit (of course within reason and based on applicants requirement). It is however good in a sense that it reduces the risks for both parties involved and discourages bad spending habits. A student may not need a high credit limit as the spending books are not as big for student life in general. A low credit limit can also be a very good starting point in getting yourself familiar to the world of credit and responsible borrowing.

Can my student credit limit be increased?

Starting out with a lower credit limit and ensuring that bills are paid in time for over a long period can have a very positive impact on one’s credit scoring. An increased credit rating leads to higher borrowing power and eventually come very handy for life after university/college too. With a good repayment record, students can apply for an increase in credit limitand there is a good chance that it will get granted. By good repayment record, we mean that this should be carried out for at least 6 – 12 months before applying for a limit increase. It is sometimes possible that a credit limit rejection might leave a foot print on your credit history and is not worth risking at all.

All in all, applying for a student credit card can be very beneficial in terms of getting used to the financial world. At the same time, using a credit card as a student efficiently without any missed payments or defaults may significantly improve your credit rating and let you hit the ground running when you start a career or need to apply for a mortgage or a car loan.

Final tips to remember for Student Credit/Loans

-          Always read the terms and conditions

-          Watch out for the payment due dates

-          If spreading payments over a few months, pay 10-20% more than the minimum payment

-          Try to repay as soon as possible

-          A bad credit rating is difficult to erase from your credit records once acquired

Good luck!

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