Half of students struggle to repay credit card balance within 3 months

Almost one in two (48%) university students have been struggling to repay their credit card balance within three months according to research by Compare the MArket, with the main reasons being the rising cost of everyday expenses (33%), increased university costs (31%), and having to prioritise other household bills such as energy or rent (23%).

The research found that four in five students (86%) have taken out or are considering taking out their first credit card for university, but 23% are unaware of the negative impacts card spending can have on their credit score.

University students’ average monthly expenditure on credit cards goes towards affording extra rent bills (£96), clothing and shopping (£81), or accommodation costs such as furnishings (£71).

Confidence in credit ratings remains high, with 72% of respondents feeling assured they will be accepted for future credit card applications.
Nearly half of respondents (47%) reported that they chose their credit card based on advice from family members, while nearly two-quarters (39%) relied on online resources such as websites, columns, advertisements, and blogs for guidance.

Guy Anker, Money Expert at Compare the Market, said “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.”