Lori Meadows
International students in the UK may find it challenging to obtain a credit card due to their lack of established credit history and income. However, some banks offer credit cards specifically for students, which can help build their credit score and provide convenient purchasing power. Before applying for a credit card, students should carefully consider their eligibility, financial situation, and ability to make timely repayments. Additionally, they should research the terms, interest rates, fees, and charges associated with different credit card options. International students can also explore alternatives, such as debit cards, which are often provided by banks when opening an account and can be used for various purchases in the UK.
| Characteristics | Values |
|---|---|
| Credit card availability for international students in the UK | Yes, but some banks are reluctant to issue credit cards to international students as they are unlikely to have an established credit history. |
| Debit cards | Debit cards are a good alternative for international students. Many banks provide a debit card when you open an account, and it can be used for online purchases and accessing services that require a credit card. |
| Store cards | Some large department stores in the UK offer store-card accounts that function like credit cards but offer special discounts. |
| Eligibility criteria for credit cards | Some banks require a 2-3 year UK resident or permanent address history (or income requirement). |
| Interest rates and fees | Credit cards may have high interest rates and fees, which can make them an expensive payment option if the balance is not paid within the grace period. |
| Credit limit | Credit cards for international students may have a strict limit to prevent over-borrowing. |
| Repayments | Failing to make timely repayments can negatively impact an individual's credit rating and result in accrued interest over time. |
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What You'll Learn
Eligibility requirements for international students
International students in the UK can open a bank account, and some universities require their students to have a UK bank account. This is a good first step for international students who want to build their credit history.
When selecting a bank, pay attention to fees and services the account offers. A basic bank account is the type of account most set up by international students, but these often don't provide bank cards. Therefore, it is recommended to see if your bank has a student account or another type of account that will allow you these conveniences. Many banks now typically provide a bank card when you open an account. This bank card is affiliated with a credit network, like Visa or Mastercard, so you can use your card to withdraw money from an ATM and you can also use it just like a credit card to make purchases online or in stores.
Some companies are reluctant to issue credit cards to international students, since they are not likely to have an established credit history. Not all banks in the UK are willing to offer credit cards to students, but some banks do have cards designed specifically for university students. These cards are likely to have a strict limit on them to prevent students from borrowing more than they can afford to repay.
To be eligible for a credit card as an international student in the UK, you will need to meet the following requirements:
- A UK bank account.
- A 2-3 year UK resident or permanent address history.
- Proof of income.
- HSBC specifically requires that you must not have opened a new HSBC credit card or received a credit limit increase within the past 6 months, and you must not be applying for a credit card that you already hold.
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Interest rates, fees, and charges
As an international student in the UK, you may want to consider getting a credit card. However, it's important to be aware of the interest rates, fees, and charges associated with credit cards before making a decision. Credit cards can be a convenient way to build your credit rating and make purchases, but they can also become expensive if you're not careful.
Firstly, let's talk about interest rates. When you use a credit card, you typically have a grace period of 20 to 30 days to pay off your balance without incurring interest fees. If you don't pay off the full balance within this period, you will be charged interest on the remaining amount. The interest rate is usually given as a representative APR (Annual Percentage Rate), which can vary depending on the card. For example, the Zopa Credit Card has a representative APR of 34.9%, while the Wise card has a rate of 26.9%. It's important to note that if you fall behind on repayments, interest will accrue, making it harder to repay the credit card company over time.
Some credit cards also come with additional fees and charges. For instance, the NatWest Credit Card does not charge any foreign transaction fees on spending, but there is a 3% fee for ATM withdrawals outside the UK. The Wise card, on the other hand, is an international debit card with no monthly or annual fees. However, it does charge a small conversion fee for spending in other currencies and additional charges may apply for ATM withdrawals from independent networks.
It's worth mentioning that some credit cards are specifically designed for students, like the Wise card, which has a representative interest rate of 21.9% APR and no annual fee. To be eligible for a student credit card, you may need to provide proof of student status or have a student current account with the bank. Additionally, some cards may require you to have a part-time job or a certain level of income, as credit cards can be difficult to obtain without passing the provider's affordability checks.
In summary, when considering a credit card as an international student in the UK, be sure to research the interest rates, fees, and charges carefully. Compare different cards and read the terms and conditions thoroughly before making an informed decision. While credit cards can provide benefits, they also come with financial responsibilities that should not be taken lightly.
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Repayment plans and credit scores
Credit cards are available to international students in the UK, but they can be expensive. If you are unable to pay the balance within the grace period, you will be charged interest fees. Credit scores are important because they affect your ability to borrow money and the interest rates you will be offered. Lenders will use your credit score to assess how high-risk a borrower you are.
Your credit score is created by UK credit reference agencies, such as TransUnion, Experian, and Equifax. These agencies collect information on your past credit behaviour, including your credit history, personal information, and financial information. This includes your address, employment status, income, and regular expenditure. Lenders will use this information to assess your suitability for their products.
You can improve your credit score by paying all your bills on time, including credit repayments, utility bills, and other household bills. It is also important to manage your accounts well, staying below your credit limit and reducing debit balances. Multiple applications for credit can damage your score, so it is worth spending time building your credit score before applying.
Instalment plans are a way to spread the cost of larger purchases by repaying in regular instalments over a period of your choice. HSBC, for example, offers instalment plans with no interest, just a monthly fee. You can choose to repay over 3, 6, or 12 months. It is important to note that if you don't make your instalment plan payment for two months in a row, the plan will be cancelled.
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Debit cards as an alternative
Debit cards are an excellent alternative for international students in the UK. Many banks now typically provide a debit card when you open an account. The card is affiliated with a credit network, like Visa or Mastercard, so you can use it to withdraw money from an ATM and make purchases online or in stores. Unlike credit cards, when you use a debit card, the money is instantly taken from your account, so if you do not have enough funds, the card will be rejected. For students new to the UK, a debit card is highly recommended since it allows you to do things that require a credit card, such as buying airline tickets, theatre tickets, rental cars, mobile phones, and making online purchases.
International students can open a bank account in the UK, and some universities require their students to have a UK bank account. To open a bank account in the UK, you will need your passport or national identity card (if you are from an EU country), your unconditional acceptance letter from your university, and evidence of your current address in the UK. A "basic bank account" is the type of account most set up by international students. However, basic accounts often don't provide bank cards or checkbooks, so you should see if your bank has a student account or another type of account that will allow you these conveniences.
HSBC, for example, offers a current account for international students who have lived in the UK for less than three years. This account comes with a contactless Visa debit card (limits may apply). If you pay for something with your HSBC Visa debit card while outside the UK, you’ll be charged a 2.75% fee for making a debit card payment in a foreign currency. There is also a fee for cash withdrawals in foreign currency or from ATMs outside the UK of 2% (minimum £1.75, maximum £5).
Another option for international students is a Foreign Exchange (Forex) card, which can be loaded with money and used to make purchases in stores or online. A Forex card is a good alternative if you are travelling to the UK for a short period or are on vacation, as it can be used like a debit card instead of carrying cash. You can link your Forex card to a savings account and issue it like a credit or debit card. However, it can be challenging to use a Forex card for online banking, and you may not be able to use it with all applications or websites. Additionally, you will need a local bank account if you plan to work part-time in the UK, as your employer will transfer your salary to a local account.
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Applying for a credit card from your home country
If you are an international student in the UK and are considering applying for a credit card from your home country, there are a few things you should keep in mind. Firstly, it is important to find out whether your card will be valid in major UK retailers and if there will be any extra fees or charges for using your card abroad. Check with the credit card company to see if they charge extra fees for international transactions.
Additionally, some companies are reluctant to issue credit cards to international students because they are unlikely to have an established credit history. If you already have a major credit card from your home country, consider bringing it with you to the UK. A UK bank may be more likely to offer you a credit card once they have reviewed your credit limit on the foreign card.
Before applying for a credit card from your home country, it is essential to do your research and understand the terms and conditions of any application. Be sure to read the fine print and be aware of interest rates, fees, and charges.
It is also worth noting that credit cards can be expensive if you are unable to pay the balance within the grace period, which is typically between 20 and 30 days. Interest fees will start accruing on your account, making it harder to repay the credit card company. Therefore, it is crucial to ask yourself if you will be able to make the necessary repayments, especially if you are unable to work in the UK while studying.
Lastly, consider the benefits of a debit card or bank card, which many banks provide when you open an account. These cards are affiliated with credit networks like Visa or Mastercard and can be used for online purchases and withdrawals from ATMs. Unlike credit cards, debit cards do not carry the risk of accruing debt over time.
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Frequently asked questions
International students can get a credit card from their home country before travelling to the UK. However, it is important to check whether the card is valid with major UK retailers and if there are any additional fees for using the card abroad. In the UK, some banks have cards specifically designed for university students, such as HSBC, TSB, and Barclays. However, these often require a 2-3 year UK resident history or income requirement.
A credit card can be used to build a credit history, which is useful if you plan on staying in the UK long-term. It also allows you to make purchases that require a credit card, such as airline tickets, theatre tickets, rental cars, and online purchases. Additionally, a credit card can help you maintain good financial records, as your monthly statement will show how you are spending your money.
Credit cards can become very expensive if you are unable to pay the balance within the specified grace period, typically between 20 and 30 days. Interest fees will begin to accrue, making it harder to repay the credit card company. If you fall behind on repayments, it can negatively impact your credit rating and make it difficult to take out large loans in the future.
