Student Credit Cards and Legal Restrictions

The university experience is one of change and for many this includes both financial independence and responsibility. Many have to face loans for fees and living expenses. Fortunately these are usually part of a government scheme and have lower interest rates and differing repayment terms. This is not so for a student credit card. A credit card is a personal loan from an institution that the individual student is responsible for. It is a great way to achieve a bit of financial flexibility but, like any normal credit card, there are legal responsibilities and restrictions associated with their use.

A student credit card is like any other credit card: a lender extends the borrower a line of credit to make purchases. The main difference is that students do not usually have an established credit history or a large enough regular income. Thus, if the student was to apply for a normal card they would most probably be rejected or have to pay an exorbitant interest rate. A student credit card provider understands the special circumstances surrounding a student and will generally lend based on the idea that no record is better than a bad record. However, there are restrictions on the limit available and, because the student is still considered higher risk than some others, there is a higher interest rate.

The flexibility that comes with have a student credit card is the main advantage to having one. There are times when a little extra cash can really save the day. You can use the card to buy some groceries or some other essentials if you know that your current account will not cover your expenses for the month. Compared to the costs of an unauthorised overdraft a credit card is the cheaper solution. With most cards if you pay of the entire amount every month you get a 56 day interest free period so that you can manage your outgoings at no cost.

Credit cards also come with some built in consumer protection benefits. For instance, if you buy something on your credit card and the company you buy the product from goes insolvent you are not responsible for the outstanding amount. Another advantage is that if you buy an electronic gadget and the product fails before a “reasonable time” has passed you can claim from the credit card company and credit card companies also offer better protection for the consumer against illegal transactions.

If you decide to apply for a card then be aware that there are certain rules that the providers must follow and that they must supply you with certain information: the interest rate and any additional charges must be made clear; your credit limit must be stated; the consequences of missing payments must be stated; you must be given written notice of missed payments before legal action can take place and you must receive a copy of the credit agreement. When you receive a copy of this then read the Terms and Conditions. You have 14 days to cancel your credit card after the date that you have received either the credit limit or credit agreement but you must repay all the money that you might have spent with interest.

The credit card is a great way to gain some independence and flexibility. Choosing a Virgin credit card, for instance and managing it well will give you a foot in the door to later credit options which will help you later in life when you are setting up a home or business. Credit cards have very high charges for cash withdrawals and interest rates are not the best but as part of a well managed financial plan they are asset that relieve worry and help to keep the wheels of life turning.