Thinking About Getting a Credit Card? Here’s the Major Pros and Cons for Students

Do your research before you start swiping 💳

This article is part of our series 'What You Wish You Knew as a Student'. You might find in-article games where you could play to win. To read more articles from this series and find more games, head here. 

Credit cards are (to some of us at least) one of the pinpoint moments of maturity. You’re past the point of just using debit cards and you’re ready to take on all the benefits of that new shiny plastic.

But wait – how much do you actually know about credit cards? And do you know if they’re actually right for you?

We surveyed over 700 members in our December Member Survey, and found 14.3% of Gen Z have a credit card while 77.7% have a debit card.

How do credit cards work?

Credit cards are a tool that allows you to borrow money from a bank or financial institution to make purchases and pay for them later. It provides a line of credit, up to a set limit, which you pay back monthly.

But beware: if you don’t pay back the borrowed amount within the interest-free period, you can accrue interest.

Credit card interest is a charge for borrowing money. How much interest you pay depends on the type of card you have, the transactions you make, and when you make repayments.

These are just some of the pros and cons to credit cards.

Pro: Helps build a credit score. ✅ 

Having a credit card and using it responsibly can help you build a good credit score meaning it’s easier for you to get approved for future loans or credit cards.

Con: You can accumulate debt. ❌

Having a credit card can be handy but you have to manage it well or can end up having to pay off a large debt from mounting interest. And if you’re not careful with it, you could develop a bad credit score too.

Pro: Access to emergency funds. ✅ 

A credit card will you give you access to funds that you may not already have and can be helpful in an emergency situation. But be aware that withdrawing money from your credit card is considered a cash advance and your interest rate will be likely 20% or higher.

Con: Interest charges and fees. ❌

Credit cards can be super handy but they can also be an expensive tool to keep on hand because they have credit card fees. These are costs like annual fees, late payment fees, balance transfer fees, and fees for using the card overseas, to name a few.

Pro: Sign-up bonuses and benefits. ✅ 

Heaps of credit cards today have sign-up bonuses like getting extra frequent flyer points when you make purchases with it, cheaper travel insurance, and more.

Con: Too easy access to funds. ❌

Having a credit card is great way to pay for those expensive things you need like appliances, a new laptop, paying for subscription services, etc.

But it can rack up a bill pretty quickly and it’s important to consider that what you’re about to buy is worth the debt you’re taking on.

Pro: You'll learn to budget. ✅ 

Knowing you have to pay off purchases at the end of the month means you’ll have to learn to budget better.

Keep track of your purchases on both your debit and credit card so you know where your money is going and you can stay on track with your saving/spending goals.

Different banks offer tools like quizzes to select what you want out of your card and information on their websites to help you compare their credit card options and find one that best suits you.

You can find more info on credit cards at Westpac, CommBank, NAB, Bankwest, ANZ, ING, SunCorp, HSBC, Macquarie Bank, Bendigo Bank and Bank Australia.

There are heaps of options available and it’s best to do your research. You can also use a website like Credit Card Compare that compares student credit cards in Australia. And, it’s updated regularly!

This article does not constitute personal financial advice. Before acting on any information in this article, you should consider your money goals and financial situation to ensure it’s appropriate to you.