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Studying expenses can quickly add up when you calculate the costs of textbooks and laptops nowadays. This is why some Australians are turning to student credit cards as a way of financing their studies.
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What are student credit cards?
If you’re studying at a university or TAFE, changes are you may struggle to make time for a full-time job. This means it can be challenging to pay for school essentials, like textbooks, laptops or work equipment. This is why some students look to credit cards for help.
Credit card eligibility requirements typically include a minimum income and some form of employment. Card providers also often reject applicants on Centrelink payments. This is why it can be challenging as a full-time student to pay for schooling, let alone get a credit card.
Student credit cards are designed with students in mind. They may come with lower income requirements (minimum of $15,000) but accept applicants with part time jobs or on Youth Allowance. Some student credit cards are also international student-friendly. Normally international students will be rejected from most Australian credit cards.
Student credit cards are unlikely to come with frequent flyer or rewards programs. They’re designed to be basic to suit a student’s needs.
Warning: Applying for a credit card and being rejected can negatively impact your credit history. Always check a card's terms and conditions and/or PDS before applying. They can give you a clear understanding of who is eligible for a credit card. Student eligibility may differ for each credit card.
What are the benefits of student credit cards?
- Access to credit: A student credit card can help you to pay for school essentials. However, it’s crucial that you have a budget and repayment plan in place. Credit cards are a very easy way for debt to grow out of control if not used carefully.
- Build credit: For younger Australians in particular, a credit card is an easy way to build a credit history. A good credit history can help your likelihood for approval for personal loans or home loans in the future.
- Learn good habits: Credit cards can understandably be risky if not used cautiously. Having a credit card could help young Aussies to learn essential money habits early, such as how to budget and make consistent repayments. You may also become more aware of where your money is going and use a credit card to better track what you actually spend money on, and what non-essentials you could cut out.
Do I need a student credit card?
It’s very easy for students - particularly young Aussies - to use credit cards in risky ways.
- Hurting your credit score
Missing a credit card repayment due to a lack of planning and budgeting can hurt your credit score. A recent survey of 1000 respondents by credit bureau Experian found that just one missed credit card repayment results in an average 22 per cent drop in the borrower’s credit score.
- Spending on non-essentials
Cash advances allow student credit cards to be used for any purpose, but ideally you’d want to use a credit card to help finance your studies. Experian found that more than half of respondents (51 per cent) admitted to putting up to $4,000 on their credit card for a holiday. Only 37 per cent said they paid it off immediately. Be wary of what you’re using your credit card for and if you can realistically pay off that debt.
- Snowballing debt
Using a credit or debit card, versus using cash, has a way of making us feel like we’re not spending much at all. If you don’t physically see the dollars leaving your hand, it can be difficult to see the debt you’re growing.
Credit cards are one of the easiest ways Aussies can make debt grow out of control. Especially if you only make minimum repayments - usually around 2 per cent of the outstanding balance or $20.
For example, making minimum repayments on a $3,000 credit card balance at 20 per cent interest would take you over 34 years to pay off. It would cost you $13,254, thanks to interest, by the time you paid it off.
It’s not all doom and gloom
If you’ve got a budget in place and you’re prepared, a student credit card can be a useful financial tool. Create a spending limit that you won’t cross. Credit cards can have daily limits in the hundreds or thousands. If you choose to get a student credit card, consider setting a limit that you know you can comfortably pay back at the end of the statement period.
What financial assistance can I get from the Australian government?
Student credit cards aren’t the only way you can finance your studies. According to StudyAssist, there are a range of government loans and subsidies in place, including:
- HECS-HELP: A loan scheme to help eligible Commonwealth-supported students to pay their student contribution amounts through a loan or upfront discounts.
- FEE-HELP: A loan to help eligible fee paying students to pay their tuition fees.
- SA-HELP: A loan that assists eligible students to pay for all or part of their student services and amenities fees.
- OS-HELP: A loan to help eligible Commonwealth supported students pay their overseas study expenses.
- VET Student Loans: A loan program that helps eligible students enrolled in certain higher-level vocational education and training courses at approved course providers to pay their tuition fees.