Half of University Students Have Struggled to Repay Their Credit Card Balance Within Three Months

Guy Anker, Money Expert at Compare the Market, commented:  

“Taking out your first credit card can be an important financial step towards gaining financial independence, and it’s encouraging to see that many students are proactively comparing providers online before choosing their card. 

“If you’re a student and considering a credit card, it’s important to be aware of both the advantages and potential pitfalls, so you choose the right card for you. Student credit cards typically have no annual fee and a low credit limit, so you won’t be able to continue spending indefinitely. They could help you spread the cost of purchases, build your credit score and learn personal finance skills. However, make sure to never borrow more on a credit card than you can afford to pay back, as you could risk getting into debt. It’s also important to pay off the balance of your credit card in full each month, otherwise you will likely need to pay higher interest rates.”

Further statistics:

According to Compare the Market’s latest research, four in five students (86%)  took out their first credit card for university or are set to do so, but 23% are unaware of the negative impacts card spending can have on their credit score. 

Financial challenges for these students are evident with nearly half (48%) of respondents admitting they struggle to repay their credit card balance in full within three months. The main reasons for this include the rising cost of everyday expenses (33%), increased university costs (31%), and having to prioritise other household bills such as energy or rent (23%). 

When asked about their reasons for purchasing a credit card, nearly half (49%) said they wanted to build their credit score, over a third (38%) wanted to manage their monthly spending, and 32% sought the benefits of air miles and cash back. One in five (22%) said it was thanks to an appealing 0% interest rate introductory offer. 

Students typically plan to spend an average of £452 from their available credit. However, 30%  are not aware of their credit score and 6% have a poor credit rating. The majority of students (83%)  said they are aware of the positive impact using a credit card can have on their credit score, though this lowers to 77% of students knowing the negative impacts it can have.  

The survey also revealed spending patterns amongst credit card users, with the average monthly expenditure used for extra rent bills amounting to £96, followed by clothing and shopping at £81, additional accommodation costs at £71, and going out (£70). 

Despite uncertainties around credit ratings, confidence remains high; 72% of respondents feel assured they will be accepted for future credit card applications, with younger individuals showing greater confidence than older age groups. For instance, 71% of 17–24-year-olds feel confident in being accepted for a credit card application, compared with 59% of 45-54-year-olds.  

83% of university students currently either have a credit card or are planning to get one.  Encouragingly, before selecting the right credit card, most students (82%) compared providers online which is a great way to see the different deals available Nearly half of students (47%) have asked or plan to ask family members for recommendations when new choosing credit cards, while nearly two-quarters (39%) rely on online resources such as websites, columns, advertisements, and blogs for guidance. One in five (21%) learnt about credit cards from social media influencers, and 27%  followed their bank’s guidance.