Student Credit Cards
Many people search for their first credit card as a student. Follow our tips and guides, and compare student credit cards to ensure you don't get off on the wrong foot.
If you or someone you love is heading off to university you should look into student credit cards. Even if your child is not yet ready to leave the nest you might consider getting them a card to help them learn about money management and to track their spending. Students, like all of us, usually want credit cards because they are more safe and secure then carrying cash. It makes sense to have a credit card, maybe more so for the university student who is busy and just learning the fundamentals of personal finance. Not only do they have access to the money they need in the form of credit but they never have to be concerned about finding ATMs to withdraw cash when they need to make a purchase. Credit cards also give students the power to make online purchases which has really become a necessity and something that young people can't imagine living without.
| Credit Card | Card Details | Interest Rate (p.a.) | Cash Advance Rate (p.a.) | Balance Transfer Rate (p.a.) | Annual fee | Interest free days (up to) | |
|---|---|---|---|---|---|---|---|
 |
A great interest rate from one of Australia's biggest, most respected banks. |
12.49% p.a. | 21.24% p.a. | 2.99% p.a. for 6months | $55 | 55 |   |
 |
A simple credit card, perfect for students. Low annual fee and protection 24/7 from ANZ's Falcon! |
18.99% p.a. | 20.74% p.a. | 7.99% p.a. for 6months | $30 | 44 | |
 |
Another credit card with a low annual free, and 55 days interest free. |
19.99% p.a. | 21.49% p.a. | 5.99% p.a. for 5months | $24 | 55 | |
As much as we all sing the praises of credit card convenience it is important to evaluate the different options before you hand one off to a student or before you, as a student, apply for one. You should know that a lot of people get into financial trouble with cards and how to avoid falling into those traps. It is also important to familiarise yourself with credit card terminology and the way your fees and interest will be assessed. This way you can learn to be a responsible credit card owner, an education that will serve you well for the rest of your life.
Understanding Student Credit Cards
A student credit card can be used the same as any other credit card. You will be able to make the all important online purchases with your card as well as telephone and in store purchases. If you travel abroad you can use student credit cards at any of the millions of worldwide outlets that accept plastic as a form of payment. Students can withdraw cash from their card at ATM machines all over the world. They can use the cards to reserve hotel rooms and book airline tickets, just like any other standard credit card. These cards will have a standard interest rate that is assessed each month to your balance. Interest rate are one of the things that many people do not understand and why so many wind up drowning in credit card debt. If you are lucky your student credit cards will have a lower interest rate then most cards, one of the benefits often offered to those cash strapped students. However, even a low interest rate can wind up costing big money over time. The interest on credit cards is assessed to the full balance on your card at the end of each billing cycle. The interest also compounds, meaning you wind up paying interest on the previous months interest fees if you do not pay off your bill.
Let's say you have a credit card balance of $100 at the end of the month that you get charged 10% interest on, so now you owe the card company $110. Even if you do not spend on your card the next month, unless you pay it off you will be charged interest on $110, not just the $100 you made in purchases. It is easy to see how quickly interest can add up. The smartest choice is to avoid these charges all together and only spend as much as you can afford to pay off each month. Also, keep in mind that the interest rate you are charged on purchases is usually significantly lower then the one you will be charged for cash withdrawals. Most people suggest only getting a cash advance from your credit card if it is an absolute emergency. The reason they should be avoided is that not only do they have higher rates of interest but they usually begin earning that interest immediately. Purchases, on the other hand, will not begin gaining interest until the end of the month or the interest free days run out, whichever comes first. But cash advances earn their high rates as soon as you take out the money. Instead of getting cash advances on student credit cards try to find a way to simply make the purchase on your card, avoiding these expensive transactions.
In addition to interest rates you may be charged other fees for owning a credit card. Most cards come with an annual fee that can be anywhere from $45 to upwards of $300. As a student, your card may waive these fees which will save you lots of money over time. Should you miss a payment, make a late payment, or go over your spending limits you will be charged penalty fees. Those fees get tacked on to your balance and, if your bill is not paid off, charged interest at the end of the billing period. To avoid this situation it is very important to track your spending and pay your bill on time each month. If it sounds like credit cards can cost a lot to own it is because they can. Even issuers of student credit cards are in the business of making money. Although they will charge students lower rates and waive fees they still need to profit, that is the whole point of any business and credit cards are no exception. Your job, as a new card owner, is to be responsible enough to minimise the amount of profit they earn by spending wisely and paying your bills on time.
Benefits Of Student Credit Cards
It might be tempting to try to get a standard credit card instead of one specifically designed for students. Standard cards come with lots of perks like rewards programmes and trip insurance. But, they also come with higher fees and higher standards for approval. Most university students will not be able to get approved for or afford these cards. Since you are just beginning to build a work and credit history you are a bit of a risk for the credit card issuer, which is why they have specialised student cards. Student credit cards will not require the kind of rock solid credit and work history that other cards require. In order to get a student card you usually just have to be over the age of 18 and currently enrolled in studies at a university. Some card issuers may require a parent or other adult to cosign on your card. However, even with a cosigner the card will be in your name and you will be responsible for it. This allows you to build a sturdy credit file but also means you have to be financially responsible to do so. Low spending limits are another perk of student credit cards. It might not sound like a great benefit because you would think that the bigger your spending limit the better, but for students this is not the case. Students who are just learning how to manage credit are better off with w low limit. This way, if they happen to overspend they will not wind up in the crushing debt that so many adults face. Instead, their bill will still be manageable letting them learn a valuable lesson without putting them into a lifetime of debt. Low interest rates and fees are also a help to students. Because most university are cash strapped charging them less to use a credit card can be a big help. This way you can purchase books and groceries and take a couple of months to pay them back without spending too much on interest. Remember though to budget for those interest fees if you will roll your bill over for a couple of months. If you must, in emergencies or for large and necessary purchases, roll your bill over work hard to pay as much as possible so that you avoid those costly interest fees. Even at a low rate it is still more money out of your pocket.
Conclusion
Student credit cards are a good way to start building your credit history. Most banks offer students fair deals and the opportunity to get a card even when they do not meet traditional card approval standards. As a student it is important to take advantage of these benefits by not overspending on your card and being responsible with your bill payment. This is the beginning of your financial life so you want to get off on the right foot. If you worry about overspending set up a card budget that you can pay off every month and stick to it. This way you are using your credit card and building a positive credit history without spending a fortune on interest charges. As parents, help your child manage their student credit cards by monitoring their spending and talking to them about being a responsible credit card owner. One of the most important lessons a student will learn is how to manage their finances. If they do it right they can look forward to a lifetime of getting great rates on loans and credit cards because they have the financial history to back it up. However, falling down on bill payment and card use now can lead to a lifetime of financial worry. No one wants their child to be burdened with bill payment so early in life, but it is a lesson that everyone must learn. If you are not sure your student is ready for a credit card yet you might consider a debit or prepaid card first. This way they spend only their own money and can learn how to manage it without the cost of interest.
