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Credit card questions

New to TSR, not sure how it works but here I am, please go easy on me. I’m interested in getting a credit card but unsure about a few things:

The internet goes on about the best credit card interest rates (APR I believe it is called) etc.. But as I understand it, you usually pay back the credit used (on that month) at the end of the month so no interest fees are applied right? So does the APR really matter?

Thinking of getting a student credit card with HSBC, as I have an account with them. Is this a good idea? Only asking as I have heard many different things?

Do HSBC student credit card applications always get accepted? Is there a chance that my application will get declined? I want to build my credit score so I want to apply knowing that I have a good chance to get accepted. Oh btw. I’m 20 on my placement year of my degree, good time to apply or no?

Reply 1

ch0c0h01ic

Original post by Mriduuul

The internet goes on about the best credit card interest rates (APR I believe it is called) etc.. But as I understand it, you usually pay back the credit used (on that month) at the end of the month so no interest fees are applied right? So does the APR really matter?

If you always pay the balance in full, every month, no.

The problem is that most people don't, and that is why some will shop around to try to get a low(er) APR deal.

Thinking of getting a student credit card with HSBC, as I have an account with them. Is this a good idea?

Check out MoneySavingExpert.com to see what sort of deal you can get with regards to APR or rewards/cashback (a quick look suggests they don't feature in any of their top recommendations!).

You don't have to get a credit card with the same bank as your current account. I simply go with whoever will give me the best cashback deal on spending, or the best card benefits.

Do HSBC student credit card applications always get accepted?

Definitely not.

Is there a chance that my application will get declined?

Very much so depending on your income and previous credit history.

I want to build my credit score so I want to apply knowing that I have a good chance to get accepted.

You may have to look at getting a "credit builder" card (high APR) to build up a credit history before you will be accepted for a card with one of the major UK banks or lenders.

Oh btw. I’m 20 on my placement year of my degree, good time to apply or no?

Depends on your current income and previous credit history.

I struggled to get a credit card until I left uni and got a well paid job.

Reply 2

Zarek

Credit cards only make sense if you pay them off in full every month because the APR is exorbitant. It’s a mugs game to borrow on them, particularly for a long period. However they are useful to take advantage of the short period of interest free credit, but of course you need to be disciplined to take advantage of this. I think getting a card linked to your student account is a good idea. My experience is that banks will give students a credit card despite their modest income. However you will need to disclose your income and have a credit check and it is not guaranteed plus the borrowing limit if you get one will probably be modest.

Reply 3

Mriduuul

Thanks guys.

On another note, do you think the arranged Overdraft route is better? As I understand it, there is still an application process where I could get denied and that also affects my credit score?

I'm basically asking about what the difference is and is it better than getting a credit card.

Reply 4

ch0c0h01ic

Original post by Mriduuul

They're completely different financial products and it depends on your purpose for taking out a credit card or overdraft.

If you're looking to borrow money then avoid credit cards and overdrafts at all costs, the APR and/or fees associated with both are incredibly high. You will get a much better deal through a personal loan or local credit union.

If you're looking to build a good credit history (ie; use for day-day expenditure and then clear balance in full at end of month) then a credit card or "credit builder" credit card (higher APR than conventional CC) is your best bet. Like I said, check out MoneySavingExpert.com - there you can check your credit file (FOR FREE!) and get an estimate of your success rate when applying for certain cards.

Using an overdraft doesn't necessarily benefit your credit history that much (eg; could be viewed as evidence that as a borrower you struggle to balance your in-goings/out-goings = higher risk), and some credit agencies/lenders view overdraft use in a negative light.

As a student I really wouldn't sweat over getting a credit card to build your credit history. It's nice to have (ie; greater consumer protection, opportunity for cardholder cashback/rewards) but it's going to make little or no difference to your life over the short term. I spent 5 years at uni without a credit card, and yet had no problems being authorised for a £3.5K limit with my first paycheck, and a 5x salary mortgage a couple of years later.

Reply 5

ReadingMum

Being in your overdraft all the time is seen as a negative when a future lender assesses you for their product. An overdraft can be recalled at any point so it is not something to rely on - once you no longer have a student account the cost of an overdraft is high.
Getting a credit card and managing it well - using and paying off in full - will contribute some good behaviour to what is likely to be a pretty thin credit history right now.