Credit Building > How do student credit cards work?

How do student credit cards work?

Wollit Team2 minute read · Updated 15th September 2024

Student credit cards in the UK are cards meant specifically for students, most of whom may have a limited credit history.

These cards usually have lower credit limits and higher interest rates compared to regular credit cards, but they can be a useful tool for building credit and managing expenses while studying.

What is a student credit card?

A student credit card is a kind of credit card that is available to people who are currently enrolled in a university or college in the UK.

There are many banks that offer these cards – like HSBC, Barclaycard, and Santander.

Student credit cards work similarly to regular credit cards, with some pretty important differences:

Student credit cards often have lower credit limits, usually from £200 to £1,000, depending on how creditworthy you are deemed to be.
Student credit cards usually have higher interest rates (APRs) compared to regular credit cards. The average APR for student credit cards in the UK is around 30%.
Student credit cards also have more relaxed eligibility criteria, making them easier to obtain for students with a “thin credit file”.

What are the pros and cons of a student credit card?

Using a student credit card can provide some important benefits:

By using the student credit card responsibly and making payments on time, you can establish a positive credit history, which can improve your credit score over time.
Student credit cards can help cover unexpected expenses, such as textbooks, travel costs, or medical emergencies.
Credit cards offer better fraud protection compared to debit cards or cash, as you can dispute unauthorised charges.

However, while student credit cards can be pretty great, there are also some risks and drawbacks to consider:

The high interest rates that come with student credit cards can lead to quite a bit of debt if the balance is not paid off in full each month. Plus, easy access to credit can also tempt students to overspend.
Some student credit cards may charge annual fees or other fees, such as for cash withdrawals or foreign transactions.
On top of this, a student credit card can hurt your credit score as well if you fail to make payments on time and in full. This can make it harder for you to get a better card or to borrow money in the future.

In fact, if you’re looking to build your credit file, a much safer alternative to a credit card – student or not – is to sign up to a specialised credit-building subscription.

One such subscription is Wollit. Building your credit history with a student credit card requires you to first buy things on debt and then repay them as soon as possible. With Wollit, you only need to pay a fixed monthly subscription. Wollit then reports this subscription as a loan repayment to the credit reference agencies.

This directly builds your credit history and improves your credit score – while keeping you safe from high APR charges, maxed-out credit limits, or the risk of more debt.

More importantly, as your credit score increases, you’ll eventually become eligible for credit cards with higher credit limits and lower APRs than a typical student credit card.