Student credit cards in Australia

What is a student credit card?

There’s no such thing as a ‘student credit card’ per se in Australia—rather, there are credit cards that may be suitable for students and young people. These cards often have low income requirements at the application stage and come with features such as low purchase rates and credit limits, and low or no annual fees. These kinds of cards are often suitable for uni or TAFE students who don’t typically have a long credit history, a high income or a record of consistent employment.

While other credit cards often come with options such as rewards programs or complimentary insurances, these types of low-rate and low-fee cards are generally designed without any such features. This is because they’re tailored towards students and others on a budget, for whom money is the most important factor.

How do you apply for a student credit card?

To apply for any credit card—including a student credit card—in Australia, you have to be at least 18 years old and an Australian citizen or permanent resident. In most cases, you can apply online, by calling your chosen financial institution, or by visiting a branch.

If you meet the criteria to apply, you will need to provide personal information such as your name and date of birth, a valid form of photo ID, and other supporting material such as recent payslips from your employer and details of any assets (like a car) and debts (like another credit card or a car loan) you may have.

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

If you’re weighing up whether it’s worth taking out a student credit card, these are some specific factors you may consider. Some of the potential advantages and disadvantages of taking out a credit card as a student include:

Pros

• Many student and other low-rate credit cards offer no annual fees for the first year, meaning your only added expense in the first 12 months could be interest payments or fees if you don’t pay off the balance in time.

• Most low-cost cards also offer low interest rates compared to other credit card types, meaning you often don’t pay as much on an outstanding balance as you would with other credit cards.

• Most come without features such as points or rewards, meaning there may be less of an incentive to buy things you don’t need.

Cons

• The low interest rates may only be for a short introductory period, after which time a higher rate may kick in.

• After the initial fee-free period expires (if there is one), you may be charged an annual fee for each year you hold onto the card. Whether you’re charged a fee and how much it is will depend on the specific card you choose.

• If you’re not responsible with your finances, having a credit card available may encourage you to spend beyond your means or to make impulse purchases.

• If you’re late paying back what you owe on your credit card, you may find this negatively affects your credit history, which could be a problem later in life. For example, having a low credit score could damage your chances of being approved for a home loan in future.

What should you consider before getting a student credit card?

If you’re a uni or TAFE student considering signing up for a new credit card, it’s advisable to do your research, consider your circumstances, and decide if there is an alternative that may suit you better. There are a few important questions you may want to ask yourself, such as:

Why do you want a credit card?

Are you planning to only use your credit card to cover any emergency expenses in between payslips, or do you want some funds to go out partying with mates? It’s important to remember that the money you’re spending on a credit card is not yours, it’s your bank’s or credit provider’s, and they’ll want it back. Carefully considering what you’ll be using the card for will help you determine whether you’ll use it for necessary purposes, or whether you would be better off saving up to spend your own money on splurges like nights out.

Can you get by with a debit card instead?

If you have a bank account, you’ll more than likely have a debit card linked to it already. A debit card functions in much the same way as a credit card, but you can only spend your own money that you have in your account. This way you avoid racking up credit card debt.

Do you want to develop a positive credit history?

If you’re looking to boost your credit score or develop a positive credit history, one way might be to pay your credit card off on time each month. If this is your aim, then be sure to carefully consider the terms of the card to make sure you use it responsibly and don’t fall behind in your payments, as this could ultimately hurt your credit score and hinder your goal.

You can check your credit score for free with Canstar or via the Canstar App.

How much can you realistically pay off?

Credit cards come with credit limits, which can be as low as $500 per month. When taking out a card, it’s worth choosing a limit you decide is appropriate for you, to help ensure you don’t accidentally spend more than you can afford. Bear in mind that the exact credit limit a provider offers you may not only depend on how much you ask for, but also on the particular card and financial institution you choose, as well as the lender’s assessment of your creditworthiness.

Most student credit cards also come with an interest-free period, a time during which you can pay off your debt without incurring interest. Take a look at your finances and decide whether you will be able to realistically pay off what you spend within the defined time frame, in order to avoid interest.

Should you get a student credit card?

The decision as to whether to get a student credit card will ultimately come down to your personal preference and needs. At a time when the cost of living crisis is affecting almost all of us, you may be wary of a credit card, given the temptation to spend more money than you have, and the subsequent possibility that you might find yourself in debt.

On the other hand, a credit card can be useful in an emergency if you need to make an essential purchase or pay for an unexpected expense, and don’t have funds available.

Ultimately, the question of whether to get a student credit card could come down to how responsible you are with money. If you feel you would be able to manage one and only use it in times of necessity, to avoid racking up unnecessary charges and paying costly interest, then you might consider getting one. If you feel like you’d be too tempted by the lure of concert tickets or a similar large expense, then perhaps it might be safer for you to hold off on getting a credit card for now.

How do you choose a student credit card?

If you decide a credit card is right for you, then once you get to the point of selecting a particular card for yourself, there are several factors worth considering. The choice may well come down to your spending habits and the confidence you have in your ability to manage your money.

If you think you may not be able to fully pay off your balance every month, then a low-rate card could be the cheapest option, as the amount of interest you’ll pay will potentially be lower than it would be on a different type of credit card.

On the other hand, if you’re confident in your ability to meet repayments or you only plan to use the credit card in emergencies, then a card with low or no annual fees may be more appropriate.

Of course, much like the Old El Paso girl says, “¿por qué no los dos?” If you can find a credit card that offers both a low rate and low or no annual fee, this could be the most effective way of keeping credit card costs down.

Be sure to read any terms and conditions and product documents, such as the Product Disclosure Statement (PDS), Target Market Determination (TMD) and Key Facts Sheet, closely to understand any fees or interest you’ll be charged before choosing to take out a credit card.

It’s also worth keeping in mind that making multiple credit card applications in a short space of time may harm your credit score. It’s often recommended that you find a credit card that’s right for your needs, and one that you also fit the eligibility requirements for, before you begin applying. Comparing your credit card options with Canstar may help you find a card that’s right for you.

What are some tips for managing a student credit card?

If you’ve decided to take out a credit card as a student, here are some tips that may be useful in managing it:

Decide on a responsible credit limit

Whatever card you choose, it’s important you decide upon a responsible credit limit based on your income, and what you know you’ll be able to repay. Most student credit cards will have a minimum credit limit that you can apply for, but try to set a maximum limit for your card as well.

When choosing a limit, it’s generally a good idea to think not just about what will give you enough spending power to cover the things you’ll realistically need on a day-to-day basis, but also to try and make sure it’s an amount you can easily pay off at the end of each month.

Make a budget

Once you have your card ready to use, it could be a good idea to set up a weekly, fortnightly or monthly budget for yourself. This could prevent your finances from getting out of hand and will help give you better oversight of your income and expenses. It could be worth trying a budgeting app that offers these features or simply creating your own spreadsheet.

Make sure you stay on top of payments and spending

It’s likely that your credit card will be linked to an online banking app, and you’ll be able to check your balance there to monitor and keep track of your purchases, and to make sure you’re paying your card off on time. It can be helpful to set reminders and make early payments if possible to keep on top of your credit card debt.

Try not to use your credit card too much

Try to avoid using your credit card where possible. This way, you may be able to avoid your debt creeping higher than anticipated. It’s also a good idea to put aside money from your pay or Centrelink, to help cover emergencies and reduce the strain on your credit card repayments.