Students warned on credit cards

by Gill Montia

Story link: Students warned on credit cards

Moneyfacts.co.uk is warning students to exercise caution in the use of student credit cards, many of which have high interest rates.

Their use can result in students without regular income accumulating unmanageable debt, even on cards with a relatively low credit limit.

This is because a few hundred pounds worth of debt can become a burden when the card holder discovers he or she can only afford the minimum repayment.

Should this happen, the debt can have a life that is longer than a three year degree course and will only add to the long term-debt carried by most graduates.

At the same time, MoneyExpert.com has found that average credit rates on UK current accounts have risen by less than the base rate rises affected by the Bank of England during the past ten months.

According to the website, average credit rates on current accounts have risen by 0.42% since October 2006, despite a 1% overall increase in the base rate.

However, current account holders remaining in the black earn 1.97% in interest on average, compared with 1.55% in October of last year.

These customers have cause for complaint because while the Bank of England’s base rate has increased by 1% during the 10 months, for those in credit, rates have risen by just half the level of that increase.