Most Australian University students will eventually get themselves a student credit card so it would pay to know exactly what you are getting yourself into by signing up for one, and exactly when it is best to use them, and how to use them responsibly.
As a student you can access special offers from banks which have special features for students, as well as student credit cards for over 18’s. Banks that have credit card offers to tertiary students over 18 include:
- Commonwealth Bank : No annual fee on credit cards with their “Student Options”. They require you to have a Streamline Account (their everyday savings account).
- Westpac: A card designed for full time tertiary students studying at a recognised tertiary institution with the first annual fee waived.
If you currently have a savings account with another bank, you’ll need to consider whether it’s worth switching banks to benefit from these savings. Debit cards are an excellent option for students and worth considering.
These student credit cards are recommended for students who are having issues with money, residence and work in relation to non-students of their own age.
Student Credit Card Offer
The Coles No Annual Fee MasterCard is a great card for students. It offers flybuys points on everyday purchases and no annual fee ever. Take advantage of 62 days interest free to help pay the balance.
- $0 p.a. annual fee
- 17.99% p.a. on purchases
- 0% p.a. for 6 months on balance transfers
- Cash Advance Rate of 17.99% p.a.
- 62 days interest free
- Minimum Income Requirement of $15,000 p.a.
Student Credit Cards Comparison
A guide to student credit cards
Student cards are issued as both debit and credit cards, and you will only be issued a card if you are a verifiable student. A debit card is a great option for you as a student as you are limited to spending the money you already own. Using a debit card prevents you from developing the bad habit of accumulating debt as you could easily do with a credit card.
What is a Student Card?
Student credit cards provide you with a low revolving balance, a low monthly repayment amount and a low interest rate. Managing a student credit card should be within your reach given that the repayment amounts are kept small and also because the low credit limit prevents accumulation of a large debt.
The following points are the essential details for you to understand regarding student credit cards you acquire:
- Having a student credit card allows you the benefits of meeting your expenses without the added burden of quickly going into debt. The credit card limits and the interest rate are purposely low to prevent that from happening. Maxing out your card may happen quickly, but if it does, you still will not have incurred an exorbitant amount of money given the low limit involved.
- Using the student credit card wisely will allow you to build a good credit rating, by not maxing out the credit limit and repaying the balance as and when required. This will help establish your financial responsibility and will show your credit providers that you are managing your debt and not living off your credit card.
- Developing a good credit record in this way will cause other credit card companies to take note and may extend to you credit cards with greater balances and higher interest rates. It may be a temptation for some students to accept additional credit cards offers and then start to accumulate unnecessary debt spread over a number of different cards.
- If you do not properly manage even a low credit limit credit card with a low interest rate, you can quickly accumulate debt. Using student credit cards over the period of your education in a disorganized manner will result in a financial disaster as you max out your card and interest payments on the unpaid balance begins to rise.
Should you select a student debit card or a student credit card?
The essential difference between a student debit card and a student credit card is that when you use a debit card you are using money that you already have. This money can be used for the purchase of anything, just as a credit card but there is no chance that you will overspend and get yourself seriously in debt.
With a credit card however, your spending involves using other people’s money or money you do not have. There is a much greater risk here of spending excessively and getting yourself seriously into debt. By far the better option is to use a debit card. Many people use credit cards to cover sudden unexpected emergencies, but better planning for such events involves saving over time for such events so when the emergency arises, you will have the funds to cover it and will not have to throw yourself further into debt at a time you may already be quite stressed out.
Saving money with cheap balance transfers
The Commonwealth Bank Student Card offers students all the benefits of owning a credit card, but adds the bonus of charging annual fees while you remain in school with their cheap balance transfers option.
Students are also eligible for special interest rates designed to be affordable for students on a low income.
If you’re a student and you’ve been struggling to keep up with mounting credit card debt, then you could benefit from cheap balance transfers with the CBA. You simply roll your outstanding balances from other credit card accounts over to your CBA Student Card and you could be charged 5.99% interest on the balance transfer amount for the first 5 months. This can help reduce the amount of interest you’re paying on your balances and reduce your monthly repayments. If you’re on a tight budget, this can help you to get back in control of your credit card debt more easily.By putting your interest savings towards repaying your balance, you could find that you’re reducing your debt levels faster than you thought possible. The added benefit of not being charged an annual fee for your Commonwealth Bank cheap balance transfers credit card while you’re still enrolled in school means even further savings.
To get the most out of your cheap balance transfers credit cards, it’s important to try and avoid charging more purchases to your new account. This is because your purchases will be charged at different interest rates to the balance transfer amount and could leave you with a resulting debt that is charged much higher.
Choosing the right Student Credit Card
Before making a student credit card application look at the following:
- Check out the best offer – give this serious thought because they can be so different, don’t fall for rewards because they look good, only go for a reward system if you seriously are going to use them and they will be a benefit to you
- A student credit card being offered from your existing bank may not be the best card for you. Check around at other places as well. Go for a low interest card
- Be smart about your use of the card – set up a budget before getting a card and make sure you work it to your advantage
- Check what any additional fees are on a card – late payment fees, over limit fees and also what the grace period is as this differs from card to card
- Don’t fall for the ‘sales hype’ when choosing your card as that is only instant gratification, it is the long term cost of the card which will be the real advantage or disadvantage
Tips for using your student credit card
Simple tips to control your student credit cards
- Make a commitment to use your credit card only on items that are essential. That is needs rather than wants. It can be a good idea to leave the card at home then go back the next day if you still really have a dire need to own the item. This strategy usually stops impulse spending which will run up a credit card in no time.
- Try to pay cash for all your everyday spending, especially for entertainment. If you don’t have your card on you, you won’t be tempted to spend more than you should. Credit card spends still have to be paid back and if they are not paid on time you will incur fees, and if not fully paid you will have interest to pay on unpaid balances.
- Have a written monthly budget then break that down to a weekly budget. That way if you spend too much one week you know you will only have to wait until the next week before you can spend again. The same with paying off your credit card. Do it in small frequent payments and you won’t miss it. This is a great strategy that gets the minimum payment done each month. If your expenses outweigh your income you need to realise that a credit card is not the way to make up the difference. Either increasing your income or lowering your expenses is the only way that you can solve this problem without causing further problems at a later date.
- Try to save a portion of your income in an emergency account. It is usually suggested that 10% is a good figure to put aside each pay. If you can’t make 10% try and make 5% because this will be so helpful should you fall sick or have an accident.
- When setting up a budget, make sure you have some money in there for self-indulgence. Too tight a budget means that you will probably splurge at some stage and put yourself in an undesirable financial situation.
Avoid using your credit card if the cost is not in your budget
- You will not have the money to pay it off in full during the next billing cycle. It is possible to pay part cash and part credit.
- You are spending on a want instead of a need. There is a big difference here and it is often this spending which will blow out your credit card balance.
- If you are doubling up on items or services just for the sake of convenience. For example, you may have a great student discount on food at your campus, but you can’t be bothered going back for a meal so you buy a meal on credit card off campus.
Smart ways to use student credit cards for educational expenses
Student credit cards are now a very popular method of managing your student finances and can be used for a wide range of student expenses. Some of these expenses include educational tools such as books, fees, and student loans.
Here are 4 ways you can make good use of student credit cards and use them to your advantage.
- Basic Living Needs. Student credit cards can be used to help ensure that you will always have certain basic needs filled. You cannot, however, let the card take control of your money. Never spend more than you make each month or else you will find yourself in debt and unable to make ends meet. This is crucial, especially for students who are generally short on money and cannot afford to be losing any.
- Supplies and Books. As a student you are most likely faced with a mountain of fees for courses and supplies. For the majority of students today it can be a big problem coming up with the cash on time to purchase what they need. It is not right for a student to have to drop a course because they do not have the proper cash to support themselves and their study needs. While a credit card may pose a risk to use on a regular basis, it sometimes is your only option. The risk of having interest build up quickly is well worth the trouble it saves when it comes to basic educational expenses.
- Room and Board. This is one of the largest expenses that students are faced with. Coming up with the cold hard cash to finance a year or several years of studies with several thousands of dollars annually can be financially crushing. Interest will build rapidly and can leave you wondering why you owe so much. There are other options that must be considered if you cannot pay your rent. Taking out student loans or borrowing from someone may give you a better opportunity to pay it off.
- Tuition. Students that are in school must pay a flat rate to stay enrolled. This is often very expensive and can leave you floating in a pool of debt and not getting anywhere. In this case a common way to fix the problem is to get what is known as a traditional student loan. Student credit cards can be a lifesaver when used properly. They can help you get through your school with less stress and a lot less worry.
Managing your finances responsibly with a student card
There are several pointers you can follow to help manage your student credit card responsibly.
- Set your financial goals and realize that you cannot have everything you want right now. You should realize that you will only achieve your larger goals later in life by slowly accumulating a savings fund today for those things. This savings should be added to from every source of funds you acquire. You may decide to deduct 10% or 15 % of all money you receive and contribute that to your savings. This should provide some motivation for you to stay clear of debt and to save consistently towards your larger goals. When you discipline yourself this way with your money, it becomes less likely that you will be frivolous with your money and spend it needlessly.
- Create a budget for yourself, but be realistic and allow for recreational spending without spending money needlessly. Attempt to live within your means, and only purchase those items that are necessary and that you can afford to pay for when the credit card bill becomes due at the end of the month. Resist the temptation to spend using your student credit card because of the ease of just swiping the plastic to get impulse purchases.
- Consider emergency situations that may come up and require an outlay of money. Rather than rely on the use of a credit card in such situations, set aside some money to help cope with it. This will prevent you going into debt when an emergency arises. You may already be experiencing stress over the situation, and to have to deal with going into credit card debt to handle the situation, only adds to the emotional trauma you may be feeling.
Student Credit Card Tip:
As much as possible, limit your use of your credit card and stay on a cash basis when making purchases. In this way you will only spend cash amounts you have set aside for your purchases and will not create unnecessary debt for yourself.
- Develop the good habit of paying off your credit card balance in full at the end of each month. This will quickly build your credit rating and will give you a sense of accomplishment in managing your student credit card responsibly. This habit will carry you forward into your adult life beyond college. Developing these good habits will allow you to live your dream life even though you may not have a great deal of money. Your good credit rating will become your way of achieving and getting the things you desire for your life. But those habits must be learned now and practiced consistently and persistently.
Be aware of repayment failure consequences
It is difficult for many students to completely understand interest rates. They need to be sure to always pay the full balance on their accounts and they need to understand that if they only make minimum payments, the interest is going to significantly increase their total debt. A majority of students have no idea that when they do not pay off their balance every time, interest keeps accumulating, and they can run the risk of the credit provider increasing that interest rate. Also, the chance of going over the allowed spending limit increases and their spending power will decrease. If students and/or parents need help understanding the proper usage of a student credit card, there are many resources online and at schools, local libraries, and credit centers everywhere.
What happens when payments are missed?
Not making payments on your student credit card will cause your debt to increase very quickly. This is because interest will continue to accrue on top of interest and before long you will quickly exceed your limit. This will incur over the limit fees and your provider will even increase your interest rate, which will further compound your debt. Credit providers will take note that you are accumulating debt and will raise your interest rate based solely on that irresponsible financial behavior.
Think about your Credit Rating
This situation will cause harm to your credit rating and prevent you from getting additional credit later. Even if you are approved for credit later for a car or for a home loan, you will be charged a much higher rate of interest due to your impaired credit report.
When your credit becomes impaired it is not the end of the world. Bad credit can be repaired by careful planning and working with your creditors to negotiate a repayment plan you will be able to manage to bring your credit back on track. The last thing you should do is not contact your creditors when you feel you are getting over your head in debt.
Creditors have a vested interest in your meeting your financial obligations and they will work with you and help you to pay off your debt. There are several ways they can structure a repayment plan, one of which may involve temporarily reducing your interest rate and also reducing your monthly payment amount.
Healing an impaired credit score now while you are a student will go a long way towards making you financially responsible as an adult. A bad credit score shows that you are a credit risk and lenders will be hesitant to offer you credit in the future. If credit is extended to you with a bad credit score, you will be charged much higher interest rates and fees than a person with a good credit rating.
Dangers of student credit cards
Drawbacks of student credit cards
As a student you will generally have little income and no credit history, that is why you will be asked for requirements that are not commonly asked in applications for other traditional credit cards. Here are some of the drawbacks of student credit cards:
- Enrollment in an accredited school. Before you will be able to apply for a student credit card, you must be enrolled in an accredited school and should be a full time student.
- Needs a co-signer. You will need a co-signer, usually your parent or your guardian, who will be responsible for paying your debts in case you’re unable to do it.
- Have higher interest rates. Most student credit cards have higher interest rates compared to regular credit cards. You are at risk for increased debts especially if you are using your credit card to fund your education.
- Other banking requirements. Generally, some are required to open a savings account on the bank that will issue the student credit card before application is accepted.
You have the choice whether to apply for a student credit card or not. You need to know how much you’ll need and you also have to weigh-up whether the high interest would justify owning your own credit card or if it would be better to have a supplementary credit card from your parents or guardian. Prior to applying for a credit card, you might also want to compare the features first because different financial institutions offer different features. Credit cards for students do provide a lot of financial freedom for any student, but know the drawbacks first before applying for one.
Eligibility for a student credit card
Requirements of a student visa credit card
You must meet several criteria in order to be eligible for a student credit card. You must be an Australian citizen, over 18 years of age, enrolled in an accredited school or university, able to provide a co-signer (often a parent or guardian who will be financially responsible for your debt) and you must have a savings account with the bank from which you are applying for a student credit card.
The best way to go about this is to research the cards on the market; effective methods of doing this include asking friends and family or simply searching them on the internet. Features that may influence how suitable and beneficial a credit card is to you are interest rates, interest free periods, reward point systems and credit limits.
Qualifying criteria for cheap balance transfers
In order to qualify for the bonuses and benefits offered to students with CBA cheap balance transfers credit cards, you will need to be over the age of 18 years old at the time of application.
You will also need to be studying full time at university of TAFE and be an Australian citizen or permanent resident.
You will also need to be studying full time at university of TAFE and be an Australian citizen or permanent resident.
CBA may also ask that you apply for a Commonwealth Bank Streamline account with Student Options in order to qualify for the cheap balance transfers credit card account, which could save you even more money on bank fees and charges.
What to look for when applying
When selecting a student credit card apply for those which provide balance transfers from other provider cards and provide a good introductory interest rate, those with low interest rates, those with no annual fees and those that supply security features which may provide a good benefit to you.
When applying for a student credit card, do your due diligence and properly research the many card offerings on the market. Compare the interest rates of the cards available to you and read all the fine print regarding your rights and responsibilities as a cardholder. Establish that you meet all the eligibility requirements and then apply to the card of your choice.
Photo thanks to Alexander Redmon from Texas, US.