What is a student credit card?
A student credit card is designed especially for students, typically offering low spending limits and a low annual fee. For anyone new to credit, it can be difficult to get approved for a standard credit card. With no history of credit or consistent employment to assess, these applicants may seem too risky for some card providers. Which is where student credit cards come in.
Card providers offering student credit cards tend to offer more lenient eligibility requirements, allowing students who are unable to prove their credit worthiness a chance to apply for a credit card. As these cards are provided to applicants who are untested in the world of credit, they generally don’t offer high credit limits.
With a low or no annual fee, student credit cards also tend to be fairly simple. That means no fancy features and for the most part, no rewards programs. However, this can be of benefit to you if you are new to credit, as it allows you to focus on spending only what you need to spend, to then pay off what you owe before interest starts accruing.
Would a student credit card be right for you?
Just like any other type of credit card, student credit cards won’t work for everyone. So, how do you know if you should apply for this type of card?
- You are a student. If you choose a student credit card, you will usually have to meet certain requirements set out by the card provider. This may mean you have to be enrolled in tertiary education, you may have to be a full time student, or you may have to meet other specified requirements. If you are unsure, check with the provider before you apply.
- You are eligible. Aside from stipulations regarding your student status, you will also have to meet certain eligibility requirements. To apply for a credit card in Australia, you typically need to be an Australian resident aged 18 or over. Card providers may also have a minimum income requirement, but for student credit cards, the amount is usually quite low. You may also find the potential sources for that income may be more flexible than on standard credit cards.
- You understand how credit cards work. Your first credit card is always going to be a learning experience, but you should still understand the basics before you apply. That means understanding that you only spend what you can pay back, and that you should always clear your balance each month to avoid interest accruing.
What can a student credit card offer?
Now you know you can apply for a student credit card, it’s time to look into why you should. Want to know what a student credit card could offer you? Let’s take a look at the highlights.
- A student credit card can give you access to credit. The main purpose of a credit card is to provide access to credit. That basically means you can use it to buy stuff now, and pay it back later. While using a credit card can take some getting used to, it can be a seriously handy tool. You simply need to make sure you only spend now what you can afford to pay back at the end of the month.
- A student credit card can offer access to features. While student credit cards tend to be pretty basic, they can offer a few handy features and extras. Whether you opt for a Visa or Mastercard, check out the extras offered by your card issuer, as these may not be fully advertised by your card provider when you apply.
- A student credit card can help you understand how credit works. Chances are this is your first foray into the world of credit. While the premise behind how credit cards work is quite simple, that doesn’t mean making them work for you is easy. But, with a little practise, you should become more confident with using your credit card correctly over time, to allow you to graduate to a more advanced credit card later on down the line.
- A student credit card can limit the potential for problems. Student credit cards tend to have a low credit limit, at least to start with. You can also choose to lower your credit limit if you want. With a lower credit limit, there is less temptation to overspend, helping you to keep a handle on your spending.
- A student credit card can help you build your credit. One of the great things about student credit cards is the potential they provide to help users build their credit. As long as you use your card wisely, you can use it to build your credit over time, to make it easier to get approved for more credit when you apply in the future.
How do you make a student credit card work for you?
Making your student credit card work for you is the key to your success with credit cards, both now and in the future. Here are some tips to keep in mind both when you are using your card, and when you are applying for it.
TIP 1. Understand what your card provider expects of you before you apply. This means checking the eligibility requirements on the card, and making sure you meet every single one of them. Reading the small print will help you understand how the card works, while also helping you to get the most out of it.
TIP 2. Don’t think of your credit limit as a challenge. When you are approved for a credit card, your card provider will provide you with a credit limit it deems affordable for you. But, just because you can spend up to that limit, doesn’t mean you should. Only use your card to pay for stuff you know you can pay back, and avoid stacking up debt on your card that will become unmanageable.
TIP 3. Always pay off your balance at the end of each month. While it can be tempting to only pay the minimum payment, doing so will mean you pay more in interest, while you stay in debt longer. When you clear your balance each month, you can stay on top of your spending, while taking advantage of features such as interest free days on your purchases.
TIP 4. Avoid cash advances. Your credit card does not work in the same way as a debit card. Withdrawing money on your student credit card will mean paying more in fees and interest, with interest accruing from the day one.
Credit Cards for Students - Frequently Asked Questions
- Low or no annual fees, meaning your only potential expense is interest payments
- Low interest rates, meaning you don’t pay as much as other credit cards
- Low credit limits, reducing the opportunity to overspend and get into debt
- Basic card, keeping it simple
- Opportunity to build credit
- Access to credit, even when you have no credit history
- Fewer features or benefits than other more expensive cards
- Typically no rewards program, or a less lucrative one than other cards
- Introductory offers may entice inexperienced cardholders, who then get into trouble after the offer ends
- Choose the right card: Compare the options using CreditCard.com.au, to find the card that best suits your needs. Keep in mind annual fees and interest, and don’t be swayed by more expensive cards offering extras – especially rewards – that you don’t need.
- Create a budget: Look at how much you have coming in, and how much you need to spend. Then create a budget that allows you to spend within your means.
- Set a spending limit: Once you have created a budget, you will know exactly how much you can spend each month. Set a spending limit on your credit – and don’t go over it. Some card providers allow you to set spending limits on your card to help you if your willpower is low.
- Use your card only for the essentials: When you first start using your credit card, you may want to keep it for essentials only. This should make it easier to pay off at the end of the month.
- Keep track of your spending: It can be all too easy to keep on spending on your card, thinking you’ll deal with the fallout later. Sometimes you don’t want to know how much you’ve spent because it’s a bit too scary to deal with. However, if you make a habit of keeping track of your card spending – either online or via the card’s app – it may help prevent you from overspending.
- Clear your balance each month: The best way to deal with a credit card is to pay it all off each month. This can help you to keep on top of your spending, while also avoiding interest accruing on your balance.
- Pay as you go: You don’t have to wait until your statement arrives to pay off your credit card. You can transfer money onto your card to pay down your balance whenever you like. This can be a great way to avoid spending more than you can afford to pay back.
- Create an emergency fund: While credit cards are great for emergencies, what happens if you can’t afford to pay off that emergency purchase afterwards? Instead of relying on your card as backup – and paying too much in interest if you can’t pay it off right away – work on creating an emergency fund instead.
- Don’t get in over your head: When you’re new to credit – or even when you’ve had a credit card for years – it can be amazingly easy to get in over your head. Avoid overspending, and create good habits to clear your balance in full each month. And, if you get into trouble, seek help straight away.