1.0 - Guide to Student Debit/Credit Cards

In this section:

• Introduction
• Credit Card Guide
• Student Loan Guide
• Savings Account Guide
• Other Resources

Credit cards are the most convenient source of credit - however that convenience comes at a cost. Our plastic pals have some of the highest interest rates and fees among financial products. However, clever management coupled with the best card for your needs makes the prospect of never paying a cent on your credit card very real.

Many people shudder at the thought of owning a credit card - The two most common reasons we hear for not owning a credit card are:

• 'I don't trust myself with one' and
• 'I can't afford a credit card'

If you truly believe you don't have the discipline to manage 'someone else's money', then you may be better off being patient and earning the money yourself.

This is up to you to decide. If you never plan to make online, phone or overseas purchases then on the surface there's little reason for credit card ownership. However, there are advantages of owning a credit card which many don't realize - and that come at no cost.

1.1 - How owning a credit card early on can help you down the track

One of the key benefits many don't realize about credit cards is the affect on your 'credit file' or 'credit rating'. Using a credit card responsibly will build and improve your credit file. Your credit file is a complete record of your financial history which any bank or lender is free to look into as they please.

If you have a bad credit file, you will be more likely to be rejected from credit application in the future, whether it be a loan, mortgage or another credit card. Even if you are approved with bad credit, you may be imposed a higher interest rate as banks see you as a 'higher threat of liability'.

1.2 - How to improve your credit rating with a credit card

Gaining good credit can be an endless cycle - sometimes you need good credit to be approved for a credit application, but the only way of improving your credit is by using it responsibly.

Student credit cards are easy to apply and be approved for if you meet the minimum criteria. Even if you don't need a credit card, you can benefit your credit rating via the following methods:

• Keeping your credit lines open: The longer you have credit card account open, the more trustworthy and responsible you will be deemed.
• A lack of late repayments and penalty fees: While banks profit from customers who are being charged late and penalty fees, those who do so frequently are also at a higher risk of being unable to repay their debt and ultimately becoming a liability.
• Demonstrate the ability to repay: Banks love consumers who spend regularly on their credit card, but also repay on time. Those who don't use their credit card at all, or who fall into recurring debt month to month are typically unappealing customers to banks.

This doesn't necessarily mean you have to spend constantly and repay interest in order to build your credit rating. Simply by paying for reoccurring expenses such as petrol or food with your credit card, then repaying it as soon as possible will demonstrate discipline on your credit file. Repaying your credit card is not any sort of lengthy hassle either.

If you use online banking, you can transfer funds from your main savings/transaction account instantly.

For more information about Australian credit ratings and your credit file, see the following resources:

• http://www.mycreditfile.com.au/faqs/frequently_asked_questions_default.aspx
• http://www.creditcardfinder.com.au/credit-card-credit-ratings.html

1.3 - How does a credit card work?

When you use a credit card, you're paying for a good or service on credit. This means that you are able to receive the product without paying any money immediately, but you agree to pay back the credit card company at a later time. Credit cards are billed monthly.

Every month you'll receive a bill which requires you to pay for all the purchases made on your credit card for the previous month. Usually, you will have to pay for all your purchases plus interest, which is a percentage of the total amount owed.

It's important that you always pay your credit card bill on time. If you miss a payment, the credit card company will charge you late fees. These fees can compound over time and be a very expensive way to purchase goods.

1.4 - When can a credit card come in handy?

If used correctly, the benefits of a credit card far outweigh the negatives. Let's take a look at a few hypothetical case studies:

1.41 - CASE ONE:

Sally works a part time job and gets paid $250 on the 28^th of each month.

On the 10th of August, Sally finds out she needs to buy some new text books ASAP for her course. Sally has no money at the moment, but would easily be able to afford her books on pay day. Sally uses her credit card to pay for the $150 books.

Because her credit card comes with a '55 day interest free period' (as the majority do), she doesn't pay any interest on her purchases, and pays back her credit card with no hassle.

In this case, a credit card allowed Sally some cash at hand when she needed it.

1.42 - CASE TWO:

Rajeev is studying full time and earns an income from Centrelink payments as well as his parents. He doesn't need a credit card to borrow money, but from time to time likes to purchase things over the internet, such as concert tickets or funding his PayPal account.

Some places he buys at don't accept EFTPOS either - which makes having a MasterCard all the handier.

Rajeev pays off his purchases as soon as possible, and since he's a student, his bank waivers his annual fee on his credit card.

In this case, Rajeev's credit card isn't used very often, and doesn't cost him simply lying around.

1.43 - CASE THREE:

Ashley is travelling internationally for 5 months. She's budgeted that she will spend around $5000, but with the nature of travel can't be sure when an emergency might pop up.

Her card also offers purchase security and fraud protection, so she doesn't need to worry if her card is lost or stolen whilst overseas.

In this case, Ashley has the security of a backup fund without the stress of losing it in an unfamiliar situation.

1.44 - CASE FOUR:

Nick is in an internship with an accounting firm, which pays him a $3,000 a month. He meets the requirements for a regular credit card, so he applies for one.

Because his bank offers student benefits to cardholders, he has no annual fee for the duration of his studies (such as Commonwealth Bank's 'Student Options').

Nick puts all the expenses he can on his credit card to take advantage of his credit card's reward program. Every year or so, he earns enough points to redeem a $100 Myer gift voucher. In this case, Nick can actually profit by maximizing his credit card's reward program.

Not all credit cards come with reward programs - those which do also come with higher interest rates. This makes reward program credit cards only suitable for those who repay their credit cards quickly and repay little to no interest. Credit card reward programs offer huge catalogues of rewards to redeem.

1.5 - How do I apply for a student credit card?

Student credit card application is no different to regular credit card application. You may apply:

• Online through the bank website
• Over the phone
• Direct at the bank branch
• Via mail

Credit Card Finder specialises in online credit card comparison. Once you have compared and found the credit card you're after, we provide a direct link to the official bank's product page where a secure online application form is available.

1.51 - What benefits are available for student credit cards?

The first and most important benefit of a student credit card is the easier approval process in comparison to a regular credit card.

The second is the annual fee waiver. The Westpac credit card offers no annual fee for the first year, followed by a regular $30.

The Commonwealth Bank credit card features no annual fee for the duration of your studies. The third is a lower credit limit to limit your spending.

This could be seen as an advantage or disadvantage. Student credit card limits often don't exceed $500, meaning you can't carry more than $500 on your credit card at any point. If you go over this limit, a fee will be imposed.

1.52 - What are the disadvantages of a student credit card?

Student credit cards have higher interest rates, which means you will be paying more for your purchases the longer it takes you to repay them. As mentioned previously, a low credit limit may also be an issue for you.

1.53 - Why should I apply for a student credit card?

You should apply for a student credit card if you need access to some quick funds from time to time, or simply need it for online, phone and anywhere else that only credit cards can access with ease. It can also help build you a positive credit history.

1.54 - Student credit cards vs. Regular credit cards

Being a student doesn't limit you to 'student only' credit cards. You may still apply for a regular credit card, which can potentially offer you higher credit limits, reward programs and low interest rates. The minimum criteria for credit card approval (for standard credit cards) is generally an annual earnings of $15,000 and a permanent state of residency.

If you have moved residency frequently over the past year, this will jeopardize your chances of approval. Ultimately, a student credit card has all the access and capability of a regular credit card, without the stricter approval criteria.

1.55 - Who is able to apply for a student credit card?

Each bank in Australia will have their own specific requirements and guidelines for student credit card approval. You can assume however you will need to at least meet the following requirements:

Be 18 years of age.

Proof of identity - Passport, Australian Drivers, Proof of Age card To be able to verify you are a student of Uni or TAFE. Most banks require you to prove you are studying on an annual basis.

A form of income, whether it be a casual/part time job or Centrelink payments.

It helps to be an Australian resident - international students may have a harder time getting approved unless they have a solid state of residence, a job and plan to stay in Australia a long time. Even then, it is up to each bank's individual credit rating criteria to determine who is approved and who isn't.

1.6 - What exactly is 'Centrelink'?

Centrelink is a government owned branch which provides income to those who need temporary financial assistance. Not everyone is entitled to Centrelink payments.

1.61 - Living Expenses When it comes to every day expenses, accommodation tops the list. Even in a share-rent situation accommodation is still expensive. It would be rare to get something that costs less than $100 a week and could be substantially more in Sydney and Melbourne. If you live away from home you will find that any Government funding you receive does not cover your total living expenses.

Centrelink does pay rent assistance in certain circumstances (up to $111.20 a fortnight if rent is more than $247.07 for people who are single with no dependent children) but the reality is, that does not cover accommodation costs and there is still a large shortfall.

Most students find that rent and food use up any Government payment and so they have to work to find money for other expenses.

This makes living at home a much for sensible financial option for most students. Most students whose family live within range of the university prefer to live at home to reduce the financial stress of living away from home.

1.62 - Government Payments - The Government benefits that students may be eligible to receive fall into two categories: Youth Allowance (age 16 to 24) or Austudy (25 and over). Both pay a maximum of up to $371.40 a fortnight if the person receiving the payment is single and has no children.

If you apply for Youth Allowance, you will be assessed as either dependent or independent. Income and assets tests will be used to work out how much you can get. If you are not independent, the parental means test will also usually apply. There is no independence test for Austudy.

A student can earn up to $236 a fortnight before their payments are affected. A student who earns between $236 and $316 a fortnight will find that their Centrelink payment is reduced by 50 cents in the dollar, rising to 60 cents in the dollar when they earn over $316 a fortnight.

See Centrelink.gov.au below to find out which payment schemes are available for students:http://www.centrelink.gov.au/internet/internet.nsf/individuals/st_payments.htm

1.7 - What's the difference between Visa, MasterCard and American Express cards?

Visa and MasterCard together own the majority market share of credit cards in Australia and globally. They make very little difference to what the credit card offers itself - they are simply the payment processing business who work in between the banks and consumers.

American Express credit cards are more prestige, and often carry high annual fees and interest rates, but offer generous reward programs. American Express act as both a lender and payment processor. A Visa or MasterCard credit card will be accepted practically worldwide. American Express is accepted in many places as well but have limited acceptance in comparison to Visa and MasterCard.

1.8 - What happens when I make a purchase or withdraw money whilst overseas?

You may have a friend or family member who came back from overseas to find out that they spent over $100 in fees from making foreign transactions and withdrawing cash.

How can we avoid forking out hundreds of dollars in fees when travelling?

Most banks will charge a flat fee or % fee of the total transaction, usually whichever is higher.

For instance, the flat fee may be $5 and the % fee is 2.50%. If Jack made a $100 cash withdrawal whilst overseas, he would be charged a $5 fee as $5 > 2.50% of $100.

However, if Jack made a $300 cash withdrawal, he would be charged a $7.50 fee as 2.50% > $5 in this scenario.

The trick therefore is to avoid frequent transactions, and to instead make fewer, larger transactions or withdrawals. If using a credit card, you can also rack up some serious interest repayments in the duration of your travels. To get around this, you can 'preload' money on to your credit card. If your credit limit is $2,000, you can only be charged interest for money you withdraw up to that amount.

If you were to transfer $1,000 on top of your credit limit, bringing your credit card funds up to $3,000, you would have $1,000 on your credit card in which interest cannot be charged. Keep in mind however that while this trick can work, each bank has their own individual terms and conditions and this may not work with your credit card provider.

Terms and conditions are something we've grown up to subconsciously ignore -Who hasn't scrolled down 10 pages of terms and conditions, checked the 'I have read the terms and conditions box' and pressed 'Next'?

When it comes to financial products however, it's your cold hard money that's on the line. It's in your favor to sift through them and find out the subtle nuances and fees which could come back and bite you down the track.

1.81 - Which credit cards are most suitable for travel overseas?

The Wizard Clear Advantage Credit Card is a unique gem which offers no annual fee or overseas transactions/withdrawal fees. Wizard were recently bought out and the Clear Advantage card is now managed by GE Money. GE have chosen not to advertise the lack of overseas transactions fees, yet the offer is still present.

http://www.wizardclearadvantage.com.au/

NAB also have a sweet deal for overseas travel, but it only comes in Debit card. A debit card has all the access of a regular credit card, but is linked to your own savings account for funding. You need to open a NAB Gold account, and once you've done that, you can apply for a NAB Gold Visa Debit Card for free. See the page for more details and application: http://www.nab.com.au/wps/wcm/connect/nab/nab/home/personal_finance/5/1/3 Find out more about the NAB Gold Visa Debit offer here.

For $10 a month, among other features, you get:

NAB Gold Overseas Travel Insurance

NAB Gold Purchase Protection Insurance

All NAB ATMs in Australia - No fees

Most overseas ATMs - No fees

If you aren't interested in either of these offers, take a look at the comparison table of different bank overseas fees at:

http://www.creditcardfinder.com.au/foreign-currency-international-fees-for-credit-cards.html

1.82 - Prepaid travel cards

Prepaid travel cards allow you to set out a set budget for your trip. A prepaid travel card lets you preload up to five or more foreign currencies on your card. When you make purchases using your card overseas, you won't be charged any foreign transaction or withdrawal fees.

The drawback is however, a fee will be imposed every time you preload money onto your prepaid travel credit card. This could end up cheaper or more expensive than simply using your EFTPOS, Debit or Credit card, depending on how you use it. It also may be a hassle to preload money from overseas if you run out of funds. For more information about prepaid travel credit cards and a comparison of using credit card vs. travel card whilst overseas, see:

http://www.creditcardfinder.com.au/commbank-prepaid-travel-mastercard-news-22-06-09.html

1.9 - Debit cards vs. credit cards

Debit cards are suitable alternatives to credit cards, depending on your circumstances.

Many people simply go for a debit card because they believe credit cards are automatically too expensive, or have been recommended by their friends and family to do so. Others prefer debit because they dislike the insecurity of spending on credit. They fear that they may become unable to pay it back later if they run out of money, or lose their source of income.

These types of fears are completely rational, especially if you don't have secure employment or income. Credit cards tend to have annual fees of ~$60 in Australia. Debit cards have monthly fees of ~$5. If the reason you're aiming for a debit card is cost, you may end up spending just as much, if not more in fees.

Luckily for students, monthly and annual fees are usually discounted, if not completely waivered. Many people are comforted by the fact that you can only spend your own money with a debit card, and therefore can't fall into debt. While this is true, what you need to watch out is overdraft.

1.91 - How do overdraft accounts work for credit and debit cards?

If you were to make a $150 purchase, but only had $100 left in your linked-savings account for your debit card, by default your transaction would not get rejected. Instead, the remaining $50 may be put into 'overdraft' with your bank. As soon as you even go 1 cent into overdraft with a credit or debit card, you're likely to be hit with a two-figure fee.

There's more - the remaining $50 will begin to accumulate interest - the longer you take to pay off the overdraft, the more interest you will have to pay.

1.92 - How can I get around overdraft?

Banks will have overdraft accounts set by default for credit cards and debit cards. Most however, will offer the option of having your transaction rejected, if it means your account will go into overdraft.

1.93 - What to remember:

• Ultimately, debit cards give you the complete access of a credit card - You can shop online, over the phone and go anywhere a regular credit card can go.
• A credit card uses your banks money which must be repaid quickly or interest will have to be paid, whereas a debit card uses the money you have available in your linked savings account.
• The biggest advantage of a debit card for students is that you don't need a credit history or have a lengthy application process to be approved.

However, this also means that using a debit card cannot influence your credit file. Credit cards are ideal in unpredictable scenarios where money might become an issue such as travelling, whereas a debit card does not offer you extra ‘emergency’ funds like a credit card can.

Student Debit Card Offers

Listed below are three quality offers for students interested in debit cards. Take note that to get a debit card, you must first apply for a transaction account with your bank. The cards below link off to their respective bank account application page for your convinience.

Debit Card	Card Details		Monthly fee
St.George Visa Debit Card	Access your own money conveniently for Internet, phone and mail order purchases with the St George Visa Debit Card. *$0 with St George Student Complete Freedom account.	$0*
NAB Gold Visa Debit Card	Unlimited NAB Transactions, travel insurance and free overseas transactions for $10 a month. No overseas fees for withdrawing cash. The ideal card for travelling internationally.	$10
ANZ Visa Debit Card	Unlimited transactions for a discounted $3 monthly for students. Purchase protection and security with the ANZ 'Falcon'.	$3*

Student Credit Card Offers

Listed below are a mixed range of credit card offers for students. Commonwealth Bank offer a plain, $0 annual fee credit card option with their 'Student Options' program, ANZ offer a standard low interest card whilst Westpac offer an authentic student credit card for those with very low incomes.

Credit Card	Card Details	Interest Rate (p.a.)	Cash Advance Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Interest free days (up to)
Commonwealth Bank Low Fee Card	Those studying full time can opt in for Commonwealth Bank's 'Student Options' on their credit cards which offers *$0 annual fees on their credit cards for students.	18.49%	19.99%	4.99% for 9 months.	$0*	55
Westpac Student Card	Choice of $300, $400 or $500 credit limit. Relatively easy approval for students. No annual fee for the first year, followed by $30.	18.95%	18.95%	4.99% for 9 months.	$30	55
ANZ Low Rate MasterCard	A standard low interest rate credit card - a popular choice. You need at least a part time job with a consistent income to be considered for approval for this card.	11.74%	19.99%	0% for 6 months.	$58	55