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Student finance: Credit cards vs pre-paid cards


Rising student fees and rental costs mean the cost of going to university is going up all the time, and those who don’t have the luxury of turning to the Bank of Mum and Dad might find themselves in need of a helping hand in the form of credit from time to time.

While nobody would advocate getting even further into debt while you’re at uni – your student loan takes long enough to pay off as it is – credit cards and pre-paid cards can actually offer a good solution to your money problems, as long as you’re sure you can manage the repayments.

Pre-paid cards and credit cards look very similar to one another, but in fact they operate quite differently. If you decide you need some help with your finances, and you’re well aware that lenders aren’t in the habit of handing out cash for free, this guide can help you to make the right choice.

Credit cards

You’re probably most familiar with this form of credit – it’s one of the most straightforward ways to borrow money and, when used properly, makes your bank balance more flexible by providing extra cash when you need it. As long as you repay the balance in full by the due date every month, you will pay nothing extra (as long as there are no additional charges like annual fees) and purchases you make on the card are protected under the 1974 Consumer Credit Act, meaning you can get a refund if anything goes wrong.

If you can’t meet a repayment, that’s when things get a bit tricky. You’ll be charged interest – sometimes a lot of interest – that could in turn make it harder to meet your next repayment.

Pre-paid cards

Pre-paid cards allow you to set a spending limit according to your budget, rather than spending from your current account or through a credit agreement. They’re a great way to teach you to how to manage money as you just load money onto the card, then use it in exactly the same way as a debit or credit card.

Unlike credit cards, pre-paid cards don’t actually give you any extra money – but then again, that means you can’t get into debt with them. They’re very handy for using abroad and some are designed just for this purpose. However, you should check whether any fees apply to avoid surprises.

Get started putting your finances in order by finding the best student account for you with our Student Bank Account Comparison Guide >>

Article by Secure Trust Bank, winner of the Fair Banking Foundation award.

Photograph by DeclanTM

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