Student credit cards 'can lead to long-term debt'
Published On 16 August 2007
As students prepare to return to university, a consumer site has warned them to be wary of using credit cards to finance their education.Lisa Taylor, an analyst at Moneyfacts.co.uk, pointed out that most providers are happy to offer students credit cards - typically with limits of around £500. However, she added that even making small monthly repayments can be tricky for students without a regular income.
She explained that a £500 debt on a credit card would cost£487.27 and take 12 years for a student to pay off if they only made the minimum repayments and the interest rate was 18.9 per cent.
Ms Taylor added: "Even during your three years of study, this balance would cost you over £200 in interest charges and still leave a balance to repay of almost £340."
While acknowledging that students probably need to borrow money to cover their university life, Ms Taylor added that student overdrafts were almost always a cheaper way to finance education.
"Credit cards can be a great way to get the best online deals and can be ideal to use in emergencies or when travelling, but they should be handled with care.
"Don't spend on your card what you can't afford to repay. If you do you could be faced with a hefty interest bill and what will seem like a never ending debt," she concluded.
Recent figures estimate that new students starting university this autumn can expect to graduate with around £20,000 of debt.
