A student credit card is specifically designed for individuals enrolled in a UK university with limited or no income.

As a student, managing finances can often be challenging, and a student credit card can provide flexibility during times when cash is tight. Not only can they help you manage your day-to-day expenses, but they also offer a valuable opportunity to build your credit history – something that's crucial when it comes to major future borrowing, such as applying for a mortgage.

Typically, student credit cards come with lower credit limits and higher interest rates. For this reason, they are best suited for covering everyday purchases, as long as the balance is paid off in full each month to avoid unnecessary interest charges.

When used responsibly, student credit cards can be a helpful financial tool. In addition to providing extra protection on your purchases, they can offer rewards like cashback or loyalty points.

If you’re thinking of applying for a student credit card, here’s how the process works:

1. Apply for your student credit card: You can often do this through an online form on the provider’s website, and will need to supply a few personal details.

2. Get approval and receive your card: Once you’re approved, your credit card should arrive within the next week or two and you’ll then need to activate it.

3. Spend on your credit card: Once activated, you can use your credit card to make purchases, but be sure to stay within your credit limit.  

4. Pay off your balance each month: You must make at least the minimum monthly repayment, but aim to pay off the whole balance to avoid paying interest.

Student credit cards differ from an overdraft or buying something with a buy-now-pay-later service like Klarna or Clearpay. Here are the benefits of a student credit card:

Purchase protection

Consumer credit laws mean that if you buy something on your credit card worth more than £100 and up to £30,000, the card provider provides protection.

If there's a problem with your purchase, and the seller lets you down, you can get a refund from your credit card provider instead.

You don't need to buy the whole item with your card - even if you just pay £1 of the price using your credit card, you can claim the full amount back if there’s a problem (assuming the full purchase price is over £100 and no more than £30,000).

As well as the benefits, there are also a number of downsides. These include:

Lower credit limits

Credit cards for students might offer lower credit limits compared to standard cards, so you might not be able to spend quite as much as you were hoping. But on the plus side, this can prevent you from building up too much debt.

Higher interest rates

Your student credit card might also have a higher interest rate compared to a standard card. This means you’ll pay more if you can’t afford to clear your balance each month.

Fees

If you miss repayments, you’ll be charged a fee, and it can also have a negative impact on your credit rating. There might also be fees for using your credit card abroad and withdrawing cash.

The best student credit card will depend on what you're planning to use it for.

That's because while all cards have some things in common, such as extra purchase protection, their other features vary wildly.

If you want the lowest interest rate on your credit card, for example, you might find the best deal with your student current account provider.

But if you want to spread the cost of purchases interest free, you'll need to compare cards to see what is on offer elsewhere.

Other perks could also work well for you. If you have a good credit rating, there are cards out there that offer free use overseas and air miles, as well as discounts and cashback.

To be eligible for a student credit card, you need to:

• Be at least 18 years old

• Be a UK resident

• Be enrolled in a course at a UK university

When considering your application for a credit card, providers need to decide two things:

• Your credit limit - the maximum amount they will let you borrow

• The APR - the interest rate they will charge on your borrowing, plus any fees

For this, they consider three factors:

• Your income. As a student, you might not have a job, and your income could be low. However, providers may require you to have a regular income. They also commonly factor in your student loans as part of it.

• Automate it: By setting up a Direct Debit from your current account to clear the balance of your card each month, you will never miss a payment

• Cash costs more: Withdrawing cash on your card from an ATM, known as a cash advance, should be avoided as you’ll be charged high fees and high interest 

• Use it for your deposit: As long as your purchase costs more than £100 and up to £30,000, you get full purchase protection no matter how much of the purchase price is paid on a credit card. So using it to cover the deposit of a holiday covers you for the entire trip.

When you’re a student, you’re likely to be relying on student loans and any extra cash you can earn from a part-time job. But that money only goes so far.

For this reason, it’s easy to get tempted by credit products such as student overdrafts and credit cards and rely on them to get by. But doing so can mean your debt can quickly spiral out of control.

Here are a few things you can do to avoid getting into debt:

• Make a budget to understand how much you have left over each month once you've covered your living expenses

• If you’re spending more than you have coming in, look for areas where you can cut back rather than using your overdraft or credit card to fill the gap

• Carry out regular price comparisons for bills such as your mobile phone and broadband

• Take advantage of student discounts

As a student, it’s important to use eligibility tools because you’re probably looking for your first credit card and may be unsure which card to apply for.

Eligibility tools will match you with the credit cards you're likely to get based on your circumstances as a student.

It uses a “soft search” credit check so your credit score will not be affected, and it saves you from applying for credit cards you can’t get. As a result, you’re less likely to end up with a rejected application.

This is important because you should wait at least three months to apply again after being rejected because multiple applications in quick succession can hurt your credit history.

Being a student, you’re already building your credit history from scratch, so a negative mark on your credit report from the start would be a significant setback. It’s best to avoid that at all costs.

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