Student credit cards

What is a “student” credit card?

A credit card suitable for a student gives you a way to buy what you need and then pay off the purchases over time, usually with interest added to the balance. Also, they often have lower interest rates and fees than other credit cards, which helps keep account costs down when you’re studying full-time.

If you use it responsibly and pay your balance off each month, getting a credit card while you’re studying at university can help you build a good credit history. This comes in handy when you’re applying for a car loan, mortgage or any other type of lending product in the future.

How do credit cards work?

As long as you’re at least 18 years old, you can apply for a credit card to help manage your expenses between paydays when you’re studying at uni. You can use a credit card to borrow and spend up to a certain amount. The amount you have available to use is your “credit limit”, and the amount you spend is called your “balance”.

Each month, you receive a statement and need to pay at least the minimum repayment amount listed for that statement period. Minimum repayments are usually 2–3% of your outstanding balance. When you get a statement, you have until the due date to pay at least that amount. This gives you a way to pay off what you spend over time. However, it’s wise to pay your balance in full for each statement period; otherwise, youcollect interest charges,and your debt starts growing.

How to apply for a credit card

After comparing credit cards to find the right option for you, the next step is to apply. You can do this online in about 20 minutes. You could also pop into a branch or phone the bank directly.

Before filling out an application, make sure you meet the credit card eligibility requirements. These can vary, but generally include:

Eligibility requirements checklist

• Are you at least 18 years old?You need to be over 18 years old to apply for any credit card in New Zealand. Alternatively, you could use adebit cardto make the same transactions you would with a credit card but using your own money instead of credit.
• What is your Kiwi residency status? Are you an international student?Credit card companies generally prefer you to be a New Zealand citizen or a permanent resident. If you are on a student visa, check out our guide oncredit cards for temporary residentsto see your options.
• How much money do you earn?You must have enough income to service the minimum credit limit available on the card. Income can include your wages from full- or part-time work, as well as Work and Income payments. If you do not have an income source, you can consider a supplementary card on a parent or guardian’s credit account or a debit card.
• Do you have an existing credit history?For most applicants, a credit card is their first credit product, meaning they do not have an existing credit history. Credit limits suitable for students are low to minimise the bank’s risk of default and give students a pathway tobuilding their history. As long as there are no blemishes on any existing credit reports, your application should be approved if you meet all of the other eligibility requirements.

The documents and information you need to provide

If you meet the credit card’s application criteria, you can apply online at any time. The details you need for the online application include:

• Personal information.This includes your full name, date of birth, residential address, email address and phone number. You also need to provide a valid form of identification, such as your driver’s licence number, passport number or Kiwi Access Card (formerly 18+ Card).
• Student information.You need to include details of the university, institute of technology or other institution you’re studying at and the course you’re enrolled in.
• Employment information.If you work outside of study, you need to provide details of your employer and income, such as contact details and recent payslips.
• Other financial information.Details of any assets and debt that you have, including savings accounts or other loans. You’ll also be asked to estimate your ongoing financial commitments, such as rent, bills and grocery costs, which helps the issuer determine whether you can afford to manage a credit card.

How much do credit cards cost?

The cost of a credit card depends on the features of the card you choose and how you use the account. The main features to consider are:

• Annual fees.Most credit cards suitable for students come with a low annual fee to help keep account costs down. Some options may even offerno annual fee, which could help you save on this cost for a limited time or the life of the card.
• Purchase rate.This is the standard interest rate applied to purchases made on the card. The higher the purchase rate, the more interest you have to pay if you carry a balance on your card.
• Cash advance rate.This is the standard interest rate applied tocash advance transactionssuch as ATM withdrawals, gambling purchases and even some bill payments. The cash advance rate is typically the highest interest rate on a credit card. Usually, it ranges from around 9.95% p.a. to 27.50% p.a. The cash advance rate is applied immediately a cash advance transaction is made.
• Cash advance fee.If you use your credit card for a cash advance transaction, you are typically charged a fee of 2% to 3% of the total transaction amount. For example, if you used your credit card to withdraw $500 from an ATM, the cash advance fee would be $10 and $15.
• Foreign transaction fees.Most credit cards charge a fee when you use it to make purchases overseas or with an international retailer online. This fee is usually between 2% and 3.5% of the total transaction. You can avoid this cost by considering credit cards withno or low foreign transaction feesor other options such astravel money cards.These cards could be useful if you’re studying abroad, going on an international holiday or if you shop online with brands that are based overseas.
• Other fees.Other fees that may apply when you have a credit card include late payment fees and charges for going over your credit limit. Always check the credit card’s product disclosure statement (PDS) for full details so that you can factor in all the costs before you apply for a card.

Tips for using a credit card

Whether or not you’ve had a credit card before, these simple tips ensure you know what to do and what not to do when you get your student credit card:

• Only use your credit card for essential items.If you want to buy something but don’t need it straight away, consider saving up for it instead. Keeping your credit card at home and saving it for textbooks, groceries, and emergencies is a good way to curb the temptation to spend.
• Stick to a budget.You should create a realistic budget that accounts for your necessary expenses (school supplies, bills, groceries) and leave room for any emergencies expenses you may have. If you stick to this, you’ll know to set aside money from your savings each month to pay off your credit card in full and avoid any nasty surprises when your bill arrives each month.
• Aim to pay your balance off in full every month.Although you’re only required to pay the minimum payment each month, doing this could land you with high-interest costs and unmanageable debt. Instead, it would be best if you aimed to pay off your balance in full each month.
• Pay as you go.While credit card statements usually come once a month, you can choose to pay off the balance more regularly. As well as ensuring that you always meet the minimum repayment, this strategy can reduce the amount of interest you pay and may even helpimprove your credit score.

Mistakes to avoid with credit cards

When you first have a credit card, you want to set yourself up for success. That means avoiding critical mistakes:

• Getting too many cards. After you’re approved for the first credit card, you may be tempted to apply for additional cards to raise your purchasing power—however, the more credit cards you have, the more significant the potential to get into debt. Multiple credit cards mean multiple monthly credit card payments to manage. To start, getting just one credit card is the best option for most young adults.
• Applying without a reliable source of income. You can’t expect to make your monthly payment without a regular source of income, for example, the money you earn from a job. Without the funds to pay your credit card balance, you risk falling behind on your payments and hurting your credit score.

How to compare credit cards

Comparing credit cards allows you to see features of different products to find one to suit your needs. We’ve outlined the main factors you need to consider for a credit card comparison below.

1. Consider your individual circumstances.This includes your study commitments, your income from work, Work and Income or other benefits, as well as your ongoing expenses. It would help if you also thought about your current money habits to decide whether you can effectively manage a credit card.
2. Look at the features of the card.Pay particular attention to the standard interest rates and fees, as well as the requirements you need to meet for any fee waivers offered by the card. This step helps you find a credit card that offers the most convenience and affordability for you.
3. Choose the card that suits your circumstances.By looking at the features of several cards and considering your circumstances, you can find a credit card that is convenient and affordable for you. You may want to look at personal loans available to students if a credit card isn’t right.

Now that you know more about student credit cards, you can compare your options and decide what types of accounts you want to use while studying.