There are many reasons why you might need a credit card as a student, and although you are in full-time education there are still many credit card options available for students. They may not have the advantages of some of the top credit cards (usually with spending limits of around £500 and higher APR of nearly 20%), but they can be very useful for several reasons.
Firstly, one of the main advantages all credit cards have is payment protection. Under Section 75 of the Consumer Credit Act, if any purchase between £100 and £30,000 is made in whole or in part with a credit card and the goods or services weren’t turn out to be unsatisfactory (or not what was advertised), you can get the money back from your card provider (who will then try to get a refund from the supplier of the goods or services). This protection applies even if the seller has gone bankrupt or is not responding to communication.
Another advantage of credit cards for students is the ability to build up your credit profile. If you meet the payment setup by clearing the balance each month, a credit card can be a source of short-term liquidity and also set you up well for further borrowing after you graduate.
You should look at what you need the card for. If you’re intent on building your credit score then a credit builder card could be the best option. If you are looking to make a large expenditure, then look for a card that has a low-interest period on purchases. Bear in mind that your credit card should not be viewed as a source of instant cash while out – withdrawing money from a bank machine with your card will mean that you start to accrue interest on the withdrawn amount instantly without any interest-free period, and also you will be charged a fee based on the amount also.
Of course, there is also a range of things to be aware of when using a card. Firstly, be aware that if you don’t manage the credit card debt well it will have an impact on your credit score and you will start to rack up charges and fees. You should always try to pay the amount owed off on time and make to sure to make minimum repayments if you have debt on the card. And beware when using the card abroad because that can incur its own set of charges and fees.
These best practices can allow you to make the most of credit cards and not get caught out by some of the pitfalls. If you do think that you might not be able to handle repayments then call the card issuer and discuss it with them. They may be able to waive the charges for a time and hopefully you will be able to minimise any damage to your credit score. A good practice to avoid this situation is by setting up a direct debit that pays off the amount owed every month.
If you stick to your budget and make payments on time then a credit card can be a great source of liquidity and a way to build a good credit score for when you leave education.