Half of university students struggling to repay their credit cards

Research by Compare the Market has found that half of university students struggle to repay their credit card balance within three months.

The data found that almost one in two (48%) university students have been struggling to repay their credit card balance within three months, 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%).

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.

Four in five students (86%)  took out their first credit card for university or are set to do so, but 23% are unaware of the negative impacts card spending can have on their credit score.

The survey also revealed spending patterns amongst credit card users, with the average monthly expenditure used for extra rent bills amounting to £96, followed by clothing and shopping at £81, additional accommodation costs at £71, and going out (£70).

Despite uncertainties around credit ratings, confidence remains high; 72% of respondents feel assured they will be accepted for future credit card applications, with younger individuals showing greater confidence than older age groups. For instance, 71% of 17–24-year-olds feel confident in being accepted for a credit card application, compared with 59% of 45-54-year-olds.

83% of university students currently either have a credit card or are planning to get one.  Encouragingly, before selecting the right credit card, most students (82%) compared providers online which is a great way to see the different deals available Nearly half of students (47%) have asked or plan to ask family members for recommendations when new choosing credit cards, while nearly two-quarters (39%) rely on online resources such as websites, columns, advertisements, and blogs for guidance. One in five (21%) learnt about credit cards from social media influencers, and 27%  followed their bank’s 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.”