So you’re feeling pretty pleased with yourself; you've passed your exams, made it to uni, and survived freshers' week. Now you’re offered a student credit card. What to do? Do you say yes, just in case? Or are you from the "credit cards are the devil" school of thought? There’s no ‘right’ answer, but if you know what you’re doing you can use your card to your - not the bank’s - advantage.

The pros

If you use it in the right way, a student credit card can be a useful money management tool and help you to get into good payment habits.

You will find that most student credit cards only offer a maximum limit of between £300-500, and though that might be frustrating at first, it will prevent you from getting into too much unmanageable debt and lower the risks of an unplanned shopping spree!

A credit card can be a useful way of borrowing money for a short space of time for free. If you are sure that you will have enough money to pay the bill off in full when it arrives, then you can use it to tide you over until more funds come in. Remember, student finance is paid termly not monthly, so unless you have an extra income or a birthday coming up, that may not be as straightforward as it seems.

Having a credit card as a student, and showing that you can keep on top of the repayments by borrowing responsibly, will help you build up a credit history and get a good credit rating - making it easier to borrow in the future for a more substantial loan, like a mortgage. It’s generally getting harder to borrow as a recent graduate, as banks are getting more cautious. Therefore if you can show you have already been responsible with credit, you are one step ahead of the game.

Credit cards also provide more protection on your purchases than buying with cash or a debit card. If something goes wrong with the purchase and the supplier won’t deal with it, you are likely to be covered by the credit card company and get your money back, over £100.

The cons

While a student credit card can help you smooth out the financial bumps on a temporary basis it should not be seen as an easy way of borrowing longer term. Even if you’ve run out of the other cheaper options like your overdraft and your student loan, it is an expensive way of borrowing and could lead to serious financial problems in the future, so it should not be entered into lightly.

On average the APR (interest) on student credit cards is higher than a regular credit card, and in some cases as high as 34.9 per cent. And they never come with the special zero per cent  deals on purchases or balance transfers that you get sometimes get with a standard card. Meaning if you don’t pay the card off in full at the end of the month, it is likely that you will be paying much more for your purchases than their original price tag. You could pay for those £500 flights to Thailand two or three times over if you just pay the minimum payments each month. Not so much of a bargain now.

For some people, having a credit card burning a hole in their pocket, can be too much of a temptation, and they find themselves buying things they don’t need, with money they don’t have, just because they can. Clearly this is the nightmare scenario. So if you think you might be tempted unnecessarily, then it’s best just not to go there. It’s much easier to say no the card in the first place unless you are absolutely sure you can trust yourself to use it in a positive way.

Top tips

However, if you do decide this is the right option for you, make sure you make it work for you with these tips 

  1. Know all your options – your interest free overdraft might actually provide you with access to more money, and it normally goes up each year while you’re studying.
  2. Never withdraw cash – you will be charged a withdrawal fee of three per cent every time.
  3. Pay it off in full each month – this is the key to being a responsible borrower and reaping the rewards in the future!
  4. Don’t miss a payment – even if you can’t afford to clear the balance in full, make sure you are meeting the minimum payments, otherwise this will result in huge penalty charges.
  5. Save for big purchases – if you can, get in to the savings habit, you can still pay with your credit card, to make sure you get the protection mentioned above, but in the knowledge you have the savings set aside to pay the bill off when it arrives.

Michelle Highman is chief executive of the Money Charity