The Fixer: Student credit card concerns
It can seem impossible to get a fair result when you are battling a large, faceless organisation alone. But never fear! The AOL Money Fixer is here to help.
This week she offers advice to a mother worried about her daughter taking out a student credit card.
My daughter Jenna is starting university in Birmingham next month. She has opened a NatWest student account with a 0% overdraft, which I understand is a good way for her to manage financially when her loan runs out and she cannot ask for any more money from her Dad!
However, she is also planning to take out a student credit card, which I am worried about because she is very young to be borrowing on a card - particularly as she has no experience of this sort of finance.
She claims that all her friends are taking out credit cards, but I am concerned that she will get herself into trouble.
I got in touch with NatWest, but it did little to reassure me. Should I try to stop her taking out a student credit card?
F Mann, London
Dear Mrs Mann,
Most of the banks that offer student accounts also provide credit cards specifically designed for students.
And the good news is that the credit limits on these cards are low, ranging from about £250 to £500. Your daughter will not be able to get herself into thousands of pounds of debt that she is unable to repay as a result.
However, any debt built up on her student credit card will result in interest charges. If she does get a card, you should therefore advise her to clear her balance in full every month to avoid debts mounting up.
This is also the best way to ensure that she has a good credit score for the future when she may need to take out a mortgage, for example.
One reason for students to have a credit card is that purchases worth £100 or more are then protected by the 1974 Consumer Credit Act and 2011 Consumer Credit Directive.
Should something go wrong, such as an online retailer going bust before the goods purchased arrive, they can therefore turn to their card provider for a refund.
As you point out, however, students do have access to large overdraft facilities, so your daughter should only take out a card if she feels she can manage her money to pay it off each month.
Otherwise, the interest charges are likely to wipe out any benefits. And as Jenna is likely to have debts totalling close to £40,000 by the time she finishes university, expensive credit card borrowing is the last thing she needs.
Whatever your financial problem, write to firstname.lastname@example.org and The AOL Money Fixer will get on the case.