3.5 What are student and graduate credit cards?

A.k.a

• Credit cards for bad credit
• University credit cards
  

Student credit cards

Students are potential long-term credit card customers so lenders have designed a group of cards to meet their specific needs.

Because most students don’t tend to have a regular income or any reasonably sized credit history, student credit cards usually come as part of a student bank account package. However, some credit card issuers do offer credit cards to students as stand-alone financial products.

Generally speaking, typical APRs are slightly higher on student credit cards than on standard credit cards, but only by 2-3%. This is a reflection of the increased risk presented by students because of their small or non-existent credit histories. The interest rates are still a good 10% lower than that offered on credit cards for bad credit.

Credit limits for student credit cards are usually quite low because most students don’t have a regular disposable income aside from their student loan payments, which generally don’t add up to more than £4,500 per year.

On top of this, students almost never get offered 0% deals on purchases and rarely get interest-free offers on balance transfers possibly because they will have never had a credit card before and so don’t have other cards with balances to transfer.

Lenders often attract students to their credit cards by offering free gifts or other incentives, usually based around students’ needs, such as discounts on books, free kitchen appliances or travel related items like travel insurance or reduced rail tickets.

Student credit cards, if used sensibly, can be a great way for students to learn how to handle their finances, to build their credit histories and handy for covering costs until the next student loan payment arrives.

However, students typically enter the personal finance arena with very little knowledge of the true costs of credit cards and how they work, and so they often find themselves confronting late payment fees and using their cards as a way to pay for things that aren’t necessarily essential.

If you are a student, remember to try to live within your means and only use your credit card if you know you can afford to make at least the minimum repayments. If you don’t, your credit rating could suffer. If you leave university with a poor credit rating you will find it hard to get other financial products such as mortgages and other types of loans.

Graduate credit cards

Graduate credit cards differ from student credit cards because they are aimed at a different group of people.

Graduates that get approved for a graduate credit card usually get awarded a lower APR and a higher credit limit than undergraduate students providing they have used their student credit cards and bank accounts responsibly. They are also likely to be eligible for more introductory interest-free offers on balance transfers and purchases.

Of course, this all depends on what type of graduate you are. If you are a graduate going on to do further study you may get a lower credit limit than a graduate who is going into full-time employment.

Either way, it will also depend on your personal credit histories and how you have behaved with your credit facilities over the course of your higher education.

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