Student credit cards

Used right, a credit card comes with a number of easy and free benefits. However, get it wrong and you can be stung for years. Here are the main pros of getting a credit card, and how to avoid the cons. 

Pros ✔️

• Free protection on anything that costs over £100. When you pay for something costing between £100 and £30,000 (so pay for just 1p on the card and you're covered), your purchase will be protected by Section 75 of the consumer credit act.
  
  This means your credit card provider must take the same responsibility as the retailer if things go wrong, which is powerful if the retailer goes bust or won't play ball. See full details in our Section 75 guide.
  
  
• Can boost your credit rating. Managing a credit card well – staying within the credit limit and paying at least the minimum on time every month – helps to build your credit rating score as it shows you're a responsible person to lend to.
  
  This makes you more attractive to lenders, which can make taking out a mortgage (or other credit such as a loan) easier and mean you qualify for the cheapest rates. 
  
  
• Can be a good back up for emergencies. If you're waiting for your student loan to come in, and you're hit with an unexpected cost such as replacing a laptop or repairing your car, a credit card enables you to pay to keep you going. You then have more time to budget to clear the card as soon as you can, avoiding more expensive options such as payday loans. 
  
  
• Can offer cheap borrowing and rewards. As we've said above, repay IN FULL and there's no cost at all. There are also many different types of credit card, with some offering 0% interest for a set number of months (so the cheapest way to borrow over the longer term) and others that pay cashback or reward points to use them.
  
  You may not have the income or credit rating to get these cards now – or the need – but use a card to build your credit rating now and you'll boost your chances when you graduate.

Cons (what to watch out for)⚠️

• Never withdraw cash on a credit card. Most cards charge interest on ATM withdrawals from day, even if you repay in full, so it's expensive. Doing so also puts a mark on your credit report, which is usually seen as a red flag to other lenders that you can't manage your money well. So avoid it at all costs. 
  
  
• Credit limits are usually low, so make sure you don't bust it. A low credit limit (typically £250 to £1,000) isn't a con, as it can help ensure you only spend amounts you can afford to repay (ideally IN FULL each month). However just be careful not to exceed this, as you'll be breaking the terms of your agreement, meaning you'll usually pay a fee and a negative mark is placed on your credit file. 
  
  
• Beware just paying the minimum repayment. Credit cards can have very high interest rates, which makes it very expensive if you don't pay off in full each month. Opt to just pay the minimum and you could find yourself in debt for years. See the minimum repayment spiral for full help. 
  
  
• Never miss a repayment. If you pay your credit card bill late or miss a repayment, not only will you be hit with interest, you'll have to pay a hefty fee and face the negative impact on your credit score. 
  
  To ensure you don't miss it, set up a monthly direct debit to automatically pay off the minimum amount (or a higher/the full amount if you can). If you know you won't be able to pay, contact your provider immediately and work with it to agree a different repayment plan.