Student Credit Cards
Best Student Credit Card
Australian University Students have many options to choose from when it comes to choosing the Best Student Credit Card. Having a credit card gives you the means to spend for your various needs, and pay for these purchases later. However, as with any form of borrowing, managing credit card debt requires prudence and a deep sense of financial responsibility.
To help find the best credit card for students the table below features a range of student credit cards which are designed to meet the special needs of Students, most specifically the fact that you probably will not have a regular income, secondly the credit card providers have also focused on keeping the fees low by reducing the range of frills, which often come pre packaged with credit cards. For details of how a Student Credit Card works and how to manage your credit card to avoid any hefty charges and fees, check out our Guide to Student Credit Cards.
A Guide to Student Credit Cards
What is a Student Credit Card?
Student credit cards are credit cards designed specifically for students aged 18 years plus, who are not in full time employment, who have probably not had a credit card before, and are enrolled in an accredited Australian School or University.
When designing Student Credit Cards the credit card providers have attempted to create 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 are relevant to students the credit card providers focused on delivering 3 key features:
- A low annual credit card fee - to ensure affordability
- Low monthly minimum repayments - to help with repayment and minimization of any interest charges
- Low monthly credit limits - to help manage debt levels, so card users do not accumulate more debt that they can afford to repay
How to compare Student Credit Cards to find the best deal
The affordability of the student credit card is a good starting point when comparing student credit card offers, to access the costs associated with each credit card you will need to compare the charges each card provider will potentially bill you as a card holder. These charges include:
- Purchase 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 by making purchases using your student credit card. To avoid incurring this interest you must simply pay off the full balance of the student credit card by the due date published 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 Rate - This is the interest rate that will be charged to calculate the amount of interest you will be charged on any outstanding balance incurred by making cash withdrawals using your student credit card. To avoid incurring this interest, which is typically at a higher rate than the purchase interest rate, you must simply pay off the full balance of the card by the due date published on your monthly statement. Given the high interest costs associated with cash withdrawals you should avoid using your student credit card to make cash withdrawals.
- Annual fee - This is a fixed fee, payable at the start of the year and then on each anniversary, the credit card provider charges for having the student credit card. Annual fees range from $0 to $100 p.a. The higher the fee the more features the credit card includes. With the objective of making Student Credit Cards affordable the Annual fees on these cards tends to be at the lower end of the scale, with some student credit cards charging $0 fee.
- Other credit card fees - Each of the credit card providers penalize card holders heavily when they fail to manage the payment of their card charging late payment fees for payments not made on the due date and over-limit fees if 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 - The majority of student credit cards include a interest free period during which you can make purchases using the 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 credit cards will tend to be limited. Having said that you will find a bunch of benefits that will be of value be it on line or Mobile management of your account, secure on line shopping and contactless payments.
How can a Student Credit Card help me?
Convenient access to funds - The student lifestyle comes with a number of essentials - there’s tuition fees, books, living expenses, and other essentials to think about. A student credit card is a useful asset when cash is tight and theirs a book you need for your course, but you don’t have the cash right now.
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 student studies. With a good credit history, you will have an easier time getting more credit later on - home, car and personal loans, and other credit cards.
What are the risks associated with owning a Student Credit Card?
Failing to spend within your means - Credit cards may be 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.
Failing to repay your card and finding yourself with increasing debts - The credit limits for student 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 simply don’t have a good idea of how credit cards work, the original debt could increase to an amount well beyond your capability to pay.
A high cost of credit - Credit Card providers view students as a high risk population in terms of their ability to repay the debts they accumulate on credit cards. To balance this risk the card providers tend to charge interest rates on student credit cards that are at the higher end of the range.
One way of avoiding having to pay exorbitant fees is to always pay the balance in full every month.
The good news is that these drawbacks certainly do not apply to all students. 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 a credit card work to your best advantage.
Student Credit Cards - Frequently Asked Questions
Student credit cards are credit cards designed specifically for students aged 18 years old and above. Student credit cards generally offer a low, or no annual fee and low monthly minimum repayments but interest rates can be relatively higher. They also have lower credit limits than regular credit cards to ensure that users don’t accumulate more debt than they can afford.
If you are an eligible college student, using a credit card would not only provide you a convenient source of funds for your educational and other needs, but also give you the opportunity to start building your credit profile before going into the ‘real world’. If a student credit card is managed well, your credit history will show it and this will go a long way into helping you get other credit privileges later on.
The features of a student credit card are not that different from other credit cards. With a student credit card, you can expect:
- Low or no annual fee. Annual fees for student credit cards typically range from $0 to $50. There are also some credit cards that waive the annual fee for the first year so that users get to enjoy the conveniences of the credit card without having to pay anything other than interest on their purchases.
- Low credit limit. Student credit cards are purposely assigned lower credit limits to prevent the user from accumulating huge credit card debt.
- Low to high interest rates. Interest rates can range from 14% to 19% per annum, which are comparative with other credit cards. On the upside, many student credit cards offer an introductory period where purchases are charged very low interest rates or none at all. Regular purchase rates could also be on the low side, especially if you opt for a card with an annual fee.
- Balance transfer offers. Balance transfer deals are also offered for those who already have existing credit card debt and want to pay down the debt at a cheaper rate. The Balance Transfer rates range from 0% to 5.99%, often for a period of 6 to 12 months. This means you’ll be paying a lot less in interest with the lower rates.
There are many advantages to getting a student credit card. Among these benefits are:
- Easy access to funds. The list of a student’s needs can get pretty long – there’s tuition fees, books, living expenses, and other essentials to think about. A student credit card can 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. Students should see the use of a credit card as an introduction to being financially responsible. 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 left university. With a good credit history, you will have an easier time getting more credit later on - 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 card that comes with a rewards program.
While student credit cards have significant advantages as outlined in the previous section, there are also drawbacks to having one.
- Risk of overspending. Credit cards may be 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 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 simply don’t have a good idea of how credit cards work, the original debt could increase to an amount well beyond your capability to pay.
- Higher interest rates. Because providers are taking a risk in giving credit to a user who may or may not turn out to be a sound account, interest rates for student credit cards are rather high. One way of avoiding having to pay exorbitant fees is to always pay the balance in full every month.
The good news is that these drawbacks don’t have to apply to every student. 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.
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 fee. This is a fixed fee the provider charges every year for the use of the card. The annual fee could be anywhere from $0 to $100, and would depend on the features that come with the card. For example, a credit card that charges a high annual fee could have lower interest rates or could offer a rewards program. Weigh the features versus the costs first before making a decision.
- 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.
As a university student, it’s not uncommon to receive a deluge of credit card offers. Here are some tips that may help you in finding the best student credit card:
- Study the offers in detail. Compare interest rates and fees, and make actual computations so you will know which credit cards will be the most affordable for you. Make sure to find out about the other terms of the card such as the interest-free period, and other charges including cash advance, late payment, and over-limit fees.
- Evaluate your financial situation and base your choice on it. While getting the 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 card with the lowest purchase rate, even if you have to pay an annual fee.
- Work with the credit limit you get. Since you will likely be starting with a low credit limit, make a plan for the use of the credit card and stick with it. Charge only necessary expenses and avoid going beyond the limit. Organize your finances so that you will be able to make prompt payments.
There are several requirements that you must meet if you want to get 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.
Failure to pay your monthly repayments on your student credit card will mean that your card provider will charge you an interest fee on the debt which is on your card. The higher the value of the debt, which is often referred to as the "outstanding balance" on your card, the greater this interest fee will be.
To reduce the interest fees 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 fees 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 access your credit worthyness, which in simple terms is your ability to repay debts on time.