The HSBC Student Credit Card is used by thousands of people every day to pay for things like meals out, new clothes, holidays and suchlike. Credit cards are easier to carry than cash, they are quick and simple to use and just about everywhere you shop will accept credit cards for payments.
They are also very handy to have around in case of an emergency, such as paying for a breakdown vehicle to come out and tow your car to the nearest garage should your car break down in the middle of nowhere!
However, before you jump right in and apply for the HSBC Student Credit Card, you need to take some time to properly weigh up whether or not you really need one at all, or if there are any better alternatives available to you.
Here we will take a closer look at:
- Good reasons why it may not be wise for you to take out a credit card
- The pros and cons of having a credit card
- Some good alternatives to credit cards to try instead
- Top tips for managing your credit card if you decide to go ahead and get one
What is the HSBC Student Credit Card?
HSBC is an investment bank based in the UK, with more than 3,900 offices worldwide. It offers a Student Credit Card that could provide a credit limit of up to £1,500. The company does not charge any annual fees and customers can earn cashback from shopping purchases.
Reasons why you shouldn’t get a the HSBC Student Credit Card
Many young people today looking to get their first credit card may be in a position where they are leaving college or university already carrying a lot of student debt.
It is not surprising to find that for the first time ever, student debt is fast outpacing credit card debt owed by the working-age population.
With so many people having to pay back their student loans from their salary for many years, it doesn’t make a lot of sense to take on even more debt by running up credit card bills.
A lot of younger people leaving education will be looking to making a start on their career but also will be seeking independence at the same time.
This means that their salary will need to stretch to cover the costs of renting a home, paying council tax, and maybe running a car as well as paying for other household bills on top!
It could be very easy to get the HSBC Student Credit Card to pay for some of these things, but you have to remember that these bills are not one-off costs, such as paying for a new pair of shoes. These bills will be right back with you again to pay off next month too – and every month going into the future.
The risk of overspending
If you know that you have poor spending habits and think that you may overspend, then getting the HSBC Student Credit Card may be the doorway to getting yourself into some serious financial debt.
It is a well-known fact that people tend to spend more using a credit card than they would if they paid for things using cash. Should you suspect that you are not good at curbing your spending, then it may be wise not to get a credit card if you know it may get you into heavy debt.
Your salary wouldn’t cover your credit card balance
As we will be discussing later in more detail, a good way to use a credit card to build your credit score is to use your card to pay for things, but then making sure you completely clear your balance each month by paying off what you owe.
This makes perfect sense when you are in a position where you can comfortably clear your credit card bill every month from your salary. However, should your earnings not meet with your credit card expenditure, this can mean you running into trouble.
Should you only work a part-time job, have a seasonal job between your studies at university, or you are unemployed, you may not be bringing in enough money to be able to pay off your credit card balance each month.
Paying your HSBC Student Credit Card interest
Don’t forget that if you fail to clear your HSBC Student Credit Card balance in full each month that you will wrack up interest payments on what you owe.
You may not like the idea of paying interest on your purchases, but that can often be the cost of having a credit card and not managing it correctly.
Think of these interest payments as dead money. It is not a nice feeling to realise that you are actually working to earn money to pay off the interest charges on your credit card rather than for spending on the things you enjoy in life.
With this in mind, ask yourself if getting a credit card will mean you will end up being charged interest because you cannot afford to clear your balance each month. Is it really worth the risk?
The pros and cons of the HSBC Student Credit Card
A lot of people think that you need a credit card to survive these days. Credit cards are now seen as an essential element of your financial health, especially when you are trying to build up your credit score to enable you to make larger purchases or secure financial products such as mortgages and loans.
The HSBC Student Credit Card could be extremely helpful to have in some situations, but you need to weigh up whether you really need one for circumstances where it may be easier or cheaper to get by without one.
Let’s look at some pros and cons of owning a credit card in more detail:
- Pro: The HSBC Student Credit Card is good for building my credit: This is true. When managed correctly you can use your credit card to purchase goods and services and then completely pay off your balance each month.
- Con: Interest payments: If you are unable to (or forget to) completely clear your HSBC Student Credit Card balance each month, then the company will charge you interest on what you owe. Your interest payments can quickly build up if you fail to clear your balance each month and over time can have a negative effect on your credit score.
- Pro: A credit card will enable me to rent a car: While it is true that there are many car rental companies that will only accept a credit card, especially for a holiday car rental overseas, you may be able to do exactly the same with a debit card.
- Con: Forgetting to clear the balance: Holidays are a time for fun and relaxation. However, taking a break from your regular routine can make it easier to forget to clear your HSBC Student Credit Card balance before your next billing cycle, meaning that you will be carrying over your balance plus the added interest.
- Pro: A credit card is good in an emergency: Having a credit card handy to help rescue you in a time of emergency can be good. Whether your car chooses to break down or your freezer packed full of food decides to stop working, it can be reassuring to have a credit card to back you up.
- Con: It can be more expensive: Emergencies happen all of the time so it would be wiser to plan ahead for any unexpected incidents. Saving a small amount of money each month to fund any future emergencies will give you more reassurance that you have got things covered. Doing this can work out cheaper than relying on a credit card and having to pay interest charges because you cannot afford to pay off the balance after your emergency.
- Pro: I can earn rewards: Using a credit card can come with a lot of added advantages such as earning reward points or discounts for popular products or services. This can be great if the credit card company offer you rewards for the things you like and buy on a regular basis.
- Con: It can be risky: Sometimes a reward can be so tempting with a generous discount or comes with a certain amount of rarity. But if it comes at a cost where you cannot afford to pay off your balance at the end of the month, then is the reward really worth the added interest rates?
An extra note about reward cards
Credit card merchants are clever people. They know that by offering rewards that people like, most will take advantage and end up spending more money on their cards than they would do under normal circumstances.
The credit merchants also know that most people fail to pay off their credit cards completely each and every month. What this means is that the credit card company will be making easy money by earning profit from the interest charged on your outstanding balance.
Not only this, but quite often the credit card company will have brokered a good deal with the reward supplier. This ensures that the profit they end up making from your interest charges is much higher than the cost to them of the actual reward.
Rules to follow when getting the HSBC Student Credit Card to not go into debt
While your main focus for getting a credit card like the HSBC Student Credit Card should be to build up your credit score, and why not as it can be an important aspect for securing loans and gaining more favourable credit rates, it will pay you to be very mindful of how you manage your credit card.
Your credit score will depend on a lot of factors, such as your credit history, or even not having a credit history at all!
With a good credit score, you will be able to secure credit to buy a home or a new car, furnish your house or take an expensive holiday abroad. However, this does take time and excellent management of your credit card to achieve.
Let’s take a look at some rules and guidelines to follow to help better manage your credit card and to avoid falling into debt.
- Aim to keep your HSBC Student Credit Card limit as low as possible. By sticking with a card with a lower credit limit you will not be so tempted to overspend. A lower credit limit will better enable you to be able to afford to pay off the outstanding balance each month.
- Avoid having too many credit cards in your name. You really don’t need any more than one single credit card as just one card can be used to buy everything you need. Having too many cards can reflect poorly on your credit score.
- Completely pay off your HSBC Student Credit Card balance each month. This will help you to more quickly build a good credit history. It will show future lenders that you are responsible with your money and can be trusted to pay on time.
- Don’t be tempted by free offers. Many credit cards come with freebies such as clothing, pizza and useful gadgets. While it may be tempting to take out a credit card offering the most freebies, if you later cancel that card and move to one with a better rate or even more freebies to collect, your credit score will take a hit. Opening, closing and owning too many credit cards can seriously dent your score.
- Don’t max out your HSBC Student Credit Card. If you use up every last penny of your available credit this can actually make your credit score drop! If you can, try to aim at only using up to 30% of your available credit if your aim is to build your credit score.
Alternatives to getting the HSBC Student Credit Card
If you have read this far and think that getting a credit card isn’t for you, then you may want to consider another option.
One option open to you here is to get something called a ‘prepaid credit card’. A prepaid card is a great way to help build up a solid credit score and show your potential future lenders that you can handle your money responsibly.
Prepaid credit cards
Prepaid cards are simply credit cards that have been pre-loaded with funds to spend. They can be used anywhere that accepts regular credit cards, so you don’t have to worry that you will only have limited places where you can use them.
These cards are:
- Ideal for people without any credit record that wants to build a good credit history
- Great for helping you stick to a tight budget
- Easier to carry than cash
- Safer to carry than cash
- Make it easy to keep track of your money
Plus, if you are still nervous about giving out your credit card number when buying online, then using a prepaid card can give you an extra level of security.
A debit card is something that pretty much everyone with a bank account owns. A debit card is linked to your bank account and you can only use your debit card to spend what money is available in your everyday bank account.
You can use a debit card pretty much everywhere that credit cards are accepted. You can also get a prepaid debit card that works in the same way as a prepaid credit card. These can also be a handy way to teach teenagers about spending, budgeting and finance.
Can you build your credit score without a credit card?
Despite what you believe, you really can live without a credit card! Although we now live in a world where electronic payments are taken everywhere, you don’t necessarily need to use a credit card to buy everything that you want.
No matter what bills you pay in your own name, whether they be your rent, mortgage, domestic bills, mobile phone or any other bill that carries your name, you can still build up enough of a good credit record to make it possible for you to qualify for more credit – as long as you pay everything on time over a period of time.
At the end of the day – you don’t need the HSBC Student Credit Card to build up your credit score, but it does make doing so easier as long as you manage it properly.
As long as you make it as easy as possible for you to completely clear your balance every month, you can build yourself a very positive credit score and you can avoid incurring any eye-watering interest payments.