Student Credit Card

Credit Card providers understand that Students are special cases when it comes to banking and credit requirements, in response they have developed a range of student credit cards that seek to cater for the specific needs and circumstances, associated with student life. Each of the major credit card providers have developed a student credit card, so when it comes to selecting the best student credit card you will find there are plenty of options.

Having a credit card provides the means to attain the things you need when you require them, and pay for the purchases later. However, as with any form of borrowing, managing credit card debt requires prudence and a deep sense of financial responsibility.

Sensible use and careful management of a Student credit card not only provides access to credit but also commences the process of establishing your credit profile and score. This “credit score” will be important as you move through life as it will quite likely be used to help determine your eligibility for other forms of credit such as mobile phone plans, car insurance, mortgages and may even be used as part of a reference for job opportunities.

To help you find the best student credit card the comparison table below features a range of student credit cards all of which are designed to meet the special needs of Students, most specifically the fact that you probably don’t have a regular income.

Student Credit Card

Knowing how a credit card works and how you can maximize your use of one is key to successfully managing a student credit card. This guide provides information on the general features of a student credit card and considers the factors that might be included in your comparison when selecting the best student credit card.

What is a Student Credit Card?

Student credit cards are credit cards designed specifically for students aged 18 years old and above. When designing Student Credit Card the primary factor the credit card providers considered was the high probability that the Students applying for these cards would have no regular source of income. This led to the development of Student Credit Cards that where low on costs, with low annual fees and low minimum monthly repayment levels. In response to the lack of regular income Student credit cards feature lower credit limits than regular credit cards, to ensure that the students don’t accumulate more debt than they can afford to repay.

The primary benefit of a Student Credit Card is that it provides a convenient source of funds for your educational costs and other living expenses, with the hidden benefit of building your credit profile whilst you complete your studies. If a student credit card is managed carefully, your credit profile will capture this, that in turn will help you get other credit privileges once you complete your studies, such as a car loan, personal loan and even a mortgage.

As they designed their Student Credit Card products the credit card providers focused their efforts on creating credit cards that are in synch with Students financial circumstances, mindful that students are typically not flush with cash, they have regular expenses and want the convenience of a credit card.

To ensure the credit cards they developed are relevant to students and their unique financial situation the credit card providers focused on delivering 3 key features:

  1. A low annual credit card fee

Annual fees for student credit cards typically range from $0 to $50, this is the fee which card holders are charged to have access to the credit card and o cover the card providers administration costs. Student credit cards can be found that waive the annual fee for the first year so that you get to enjoy the conveniences of the credit card without having to pay anything other than any interest incurred on purchases

  1. Low monthly minimum repayments

With monthly repayments starting at $10 the credit card providers have sought to keep this low to make student credit cards affordable and easy to manage.

  1. Low monthly credit limits

Student credit cards are purposely assigned lower credit limits to prevent students from accumulating huge credit card debts that they cannot afford to repay.

 

Compare Student Credit Cards to find the best deal

The affordability of a student credit card is a good first step when making a comparison of the available student credit card offers. To work out how much a credit card might end up costing you will need to compare the fees and interest charges each card provider will potentially bill you as a cardholder. These costs include:

Purchase Interest Rate - This is the interest rate that will be used to calculate the amount of interest that you will be charged on any outstanding balance, incurred from using your student credit card to make purchases. To avoid incurring this interest you must simply pay off the full balance of the student credit card by the pay date as shown on your monthly statement. ​If you believe you will be unable to repay your credit card in full each month you should be looking for a student credit card with the lowest purchase rate, to minimize any interest charges.

Cash Advance Interest Rate - A ‘cash advance’ can be useful for emergency access to cash, but it’s an expensive option, because the interest rate applied to a cash advance is most often higher than the interest rate applied to purchases. And, unlike purchase interest, there’s usually no interest-free period. The interest starts being calculated from the day you make a cash advance. If you don’t plan to pay it back quickly, you could pay quite a lot in interest Given the high interest costs and no interest free days associated with cash withdrawals you should avoid using your student credit card to make cash withdrawals.

Annual Credit Card Fee - This is a fixed fee, payable at the start of the year and then on each anniversary of holding your student credit card. Annual fees range from $0 to $100 p.a. As a general rule the higher the fee the more features the credit card includes. To keep the cost of Student Credit Cards affordable the Annual fees tends to be at the lower end of the scale, with some student credit cards charging $0 fee.

Other credit card fees - Failure to manage the payment of your student credit card will generally lead to penalty fees being added to your card balance, with late payment fees charged when payments not made on the due date and over-limit fees should you go beyond your credit limit. A range of other per transaction fees can also be charged by the provider against certain types of card usage, such as overseas use and atm withdrawals. If you plan on using your student credit card for these types of transaction you should build them into your comparison of your shortlisted credit cards.

Interest Free Period - Most student credit cards include an interest free period during which you can make purchases using the credit card, without having to pay interest on those purchases. Many cards include an interest free period of up to 55 days. This interest free period means that you have more time to re pay the debt you have occurred, without incurring any interest, so a good number of interest free days is certainly worth looking out for.

Having established a short list of credit cards based on the costs associated with the credit cards you can now move onto comparing the benefits each student credit card provides and the relevance and value of these to you.

Given that Student Credit Cards do have a skew to the lower cost end of the market the number of benefits pre packed with the student credit cards will tend to be limited. Having said that you will find a bunch of benefits that will be of value including on line or Mobile management of your account, secure on line shopping and contactless payments.

Am I eligible for a Student Credit Card?

There are a number of requirements that you must meet before applying for a student credit card. In most cases, the applicant:

  • Must be an Australian citizen or permanent resident, aged at least 18 years old
  • Must be enrolled in an accredited school or university
  • Co-signer - You may need to provide a co-signer who can either be your parent or guardian. The co-signer will then be responsible for your debt in case of default.
  • Must have a savings account with the bank or provider you are applying to. This requirement is not mandatory for all providers but is common among many of them
  • The right information is always important to getting the credit card that is most suitable for your needs and finances. Glean as much knowledge as you can about the different cards and providers before making your final choice for a student credit card.

 

The Pro’s and Cons of a Student Credit Card

The Pro’s

Easy access to funds.  The list of gear required to get though your studies can get pretty long - from tuition fees, books, living expenses, to many other essentials including of course a healthy social life. As you seek to balance all these requirements a student credit card could come in handy when there’s an immediate need to be met and you don’t have the funds to hand.

Good start to financial responsibility. Credit card ownership is a fantastic introduction to being financially responsible and a stepping-stone to independence. While most student credit cards come with a low limit, it requires discipline to stay well within that limit, pay balances in full if possible, and pay on time.

Helps you establish credit history. Being able to prudently manage a student credit card is an achievement that will follow you long after you have completed your studies. With a good credit history, you will have an easier time getting more credit in the future - home, car and personal loans, and other credit cards.

Convenience. A credit card is a convenient way to pay for purchases because you won’t have to carry cash around with you. You can even get rewarded for your spending if you choose a credit card that includes a rewards program.

 

 The Con’s

Risk of overspending. Student Credit Cards are certainly a convenient and easy source of instant funds but with the convenience comes the temptation to make unnecessary purchases and to spend beyond one’s means.

Risk of getting into serious debt. The credit limits for student credit cards may be kept low to prevent such a scenario from happening but if you only pay the minimum amount every month, or make late payments, or overspend, your credit card debt could increase to an amount well beyond your ability to repay.

Higher interest rates. Interest rates for student credit cards are at the higher end of the range, purely because the providers are seeking to offset some of the risk they are taking by extending credit to new student customers who they have no track record with. To avoid the impact of these high interest rates focus on always paying the card balance in full, each and every month.

The good news is that these drawbacks don’t have to apply to you. If you understand your responsibilities as a credit card owner, spend only on necessary purchases, and make timely and full payments every month, you can make credit work to your best advantage.

 

Managing your Student Credit Card

Any purchases you make using your student credit card have to be repaid in full. To avoid incurring any interest or late payment fees you should pay any amount due in full, before the due date, as published on your monthly statement. This prompt payment of your bill will also contribute to building a good credit score.

Managing a student credit card, which is generally the 1st credit card you will have held, can be daunting and thwart with challenges, to ease the strain consider this checklist that will assist you in managing your credit card, and in turn build a positive credit score.

  • Never exceed your credit limit - This is the maximum amount you are authorized to spend on your credit card each month, as set by the credit card provider, spending over this amount in any month will generally incur penalty fees.
  • Pay at least the minimum monthly payment - This payment amount is published on both your hard copy and online statement, failure to pay this amount will again result in penalty fees.
  • Pay before the due date - When making your credit card payment allow enough time for the funds to reach the credit card provider, so don’t make the payment on the due date, make it at least a couple od days before the due date.
  • If possible, pay the entire balance every month - By paying the balance in full you will avoid paying any interest charges, this should be a a priority as leaving an outstanding balance on your student credit card will soon see significant interest charges added to your balance.
  • Pay more than the minimum whenever you can - This reduces the amount of interest you are charged, as you will be reducing the amount of outstanding debt on your student credit card.
  • Don’t charge anything you can’t pay off in 30 days - If you can stick to this rule you will end up paying no interest or late fees, this is the perfect outcome, which provides free credit..
  • Use credit sparingly - remember whatever you spend on your student credit card must be repaid and the longer you take to pay back the debt the more expensive it will become.
  • Overspending - This is by far the number one mistake students make when the own a student credit card. To avoid this, students new to credit cards should open only one student credit card account and request the lowest credit limit at the point of application.
  • Don’t change your spending habits - Your student credit card will offer you the ability to purchase things to a different rhythm, as you are not limited to the amount of cash in your pocket. Avoid this rhythm change and continue to spend in line with your normal habits and within your means.
  • Don’t use your student credit card to access instant cash - When you use your student credit card at an ATM or for a purchase at a store and receive cash back, you are triggering the cash advance feature of your card. Interest rates for cash advances are high, often over 20% p.a., with interest on these advances incurred immediately. In conjunction with these high interest rates cash advances also typically attract a one of transaction fee that can be as high as 3% of the transaction value.
  • Don’t chase earn credit card rewards points - Some student credit cards include an ability to earn rewards points for each dollar spent using the card, these points can then be redeemed for products, services or cash back. This lure of building a stack of reward points can lead to overspending on your credit card, which may in turn lead to interest and late payment fees.

 

Selecting the Right Student Credit Card for You

As a student, it’s not uncommon to receive a deluge of credit card offers as the credit card providers see you as a hot prospect for a great long-term customer. Here are some tips designed to help you sort through these offers on your path to finding the best student credit card for you:

Study the offers in detail - Compare interest rates and fees, and make actual computations so you will know which student credit cards will be the most affordable for you. Study the terms of the credit card such as the length of any interest-free period and understand any charges including cash advance, late payment, and over-limit fees.

Evaluate your financial situation and base your choice on it - While getting the student credit card with the lowest fees is a given, make sure that it fits your circumstances best. For instance, if you don’t think you will be able to make full payments every month, get the student credit card with the lowest purchase rate, even if you have to pay an annual fee.

Work with the credit limit you are offered by the provider - Since you will likely be starting with a low credit limit, make a plan on how you intend to use your student credit card and stick with it. Charge only necessary expenses and avoid spending beyond the credit limit. Organize your finances so that you will be able to make prompt payments.

 

Student Credit Card Vs. Student Debit Card: The Pros and Cons

Both student credit cards and debit cards offer you the convenience of cashless purchases. But that is where the similarity ends because there is a vast difference between how credit cards and debit cards work.

With a credit card, the money made available to you by the card provider is extended to you as credit. Simply put, you are merely borrowing any amount you charge to your credit card, with the understanding that you will pay back that amount, plus any interest, at a later date. In contrast using a debit card means that you will be spending your own money, with any amounts you spend on using your debit card being deducted directly from your bank account.

One advantage of using a student credit card is that you can spend and make payments even if you don’t have the actual funds for that purchase in your bank account. This is convenient when you need to pay for important expenses such as school fees or books, or for emergencies. But this convenience can also be double-edged sword. With a student credit card in your wallet, it’s easy to overspend or make non-crucial purchases. In addition, interest charges and fees for a student credit card can be expensive.

On the contrary, a student debit card gives you the assurance that you won’t have to pay for any interest expense or fees. A debit card also prevents you from getting into serious debt and financial trouble because you can only spend what you have. There is much less risk of splurging or overspending.

Whether you get a student credit card or a debit card, or both, depends on your needs and financial situation.

Frequently Asked Questions

What are the eligibility requirements for a Student Credit Card?

There are several requirements that you must meet before you apply for a student credit card. In most cases, the applicant:

  • Must be an Australian citizen or permanent resident, aged at least 18 years old
  • Must be enrolled in an accredited school or university
  • Must have a co-signor, usually a parent or guardian, who will guarantee that he/she will be responsible for the debt in case you are unable to pay
  • Must have a savings account with the bank or provider you are applying to. This requirement is not mandatory for all providers but is common among many of them.

The right information is always important to getting the credit card that is most suitable for your needs and finances. Glean as much knowledge as you can about the different cards and providers before making your final choice for a student credit card.

What will happen if am unable to make a monthly repayment on the due date to my Student Credit Card?

Failure to pay your monthly repayments on your student credit card will mean that your credit card provider will charge you interest on the debt which is on your credit card. The higher the value of the debt, which is often referred to as the "outstanding balance" on your credit card, the greater this interest charges will be.

To reduce the interest charges you will be charged you should look to reduce the value of this outstanding balance as quickly as you can.

If you miss multiple monthly repayments not only will you be acrruing high interest charges you will also be potentially harming your credit report. This is a report which is frequently used by credit providers (e.g. mobile phone companies & banks) to assess your credit worthyness, which in simple terms is your ability to repay debts on time. 

How much will a Student Credit Card Cost me?

If you’re planning to get a student credit card, then you should be ready for the costs that come with it. These costs include:

Interest charges - This is the amount that will be charged on any outstanding balance you do not pay at the monthly payment due date. The actual amount will vary depending on how much of your credit limit you actually use and how much you pay on the due date. If you pay the full outstanding balance every month, then you will have temporarily used the funds at no cost at all.

Annual card fee - This is a fixed fee the provider charges every year for the use of the credit card. The annual card fee could be anywhere from $0 to $100, and would depend on the features that are offered on the credit card. For example, a credit card that charges a high annual fee could have lower interest rates or may offer a rewards program. Weigh the features versus the costs  before making a decision on the credit card type which best suits your needs and circumstances.

Other fees - These costs are for those miscellaneous transactions that are not charged on a regular basis. Examples would be cash advance fees, late payment fees for payments not made on the due date, over-limit fees if you go beyond your credit limit, and others.