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Newbie Question(several of them)

Hi there

Credits cards are a bit of a mystery to me. I know essentially what they do but not quite sure the mechanics of them. I have a student loan that is repayment is calculated on my income tax and my gross monthly take home is vastly reduced because of this. I want to clear this loan asap(20k) and wondering whether I can use a credit card to do this?

My second question is; how many credit cards can you have at once?

My income after tax is 30k and I have no other debts and never had a credit card.

Sorry for the naive questions but I am a bit old fashioned with money but realise that I can use credit cards to my advantage.

Thanks

Comments

  • Superscrooge
    Superscrooge Posts: 1,171 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 19 January 2016 at 6:38PM
    Whilst there are always exceptions the general advice is not to rush to pay off your student loan.

    Normally I would always advise paying off debts as soon as you can. But student loans are a very cheap form of debt. I think the current interest rate is about 0.9%. Spare money you have can earn more in interest in a savings account, than the interest you are paying on your student loan.

    Also with the student loan you only make repayments if your income is above a certain level and the debt is wiped after 30ish years if it has not been paid off.

    Further details on the below link

    http://www.moneysavingexpert.com/students/student-loans-repay

    Credit cards (unless you can get a 0% deal) charge a horrendously high interest rate. Shifting a student loan debt onto a credit card would not be sensible in my opinion.

    Even with a 0% card you would need to be confident you could pay off the debt before the end of the 0% deal.
  • lynz68
    lynz68 Posts: 323 Forumite
    If you have never had a credit card you're unlikely to get one with 0% interest as these are usually only given to those with a good history of credit card use and you certainly wouldn't get one with that large a credit limit.

    Student loans really are the cheapest form of loan you will ever have. While the amount you are paying for your loan looks expensive ultimately a credit card could cost you a lot more in the long run.

    Whilst I have 5 cards myself with credit limits between £5000 to £15000 this has been built up over several years and my balances are no where near the limits some I only keep to move balances around to keep the 0% interest others I use everyday and pay in full each month.
  • cats2012
    cats2012 Posts: 1,182 Forumite
    Hey there - I'm another to suggest don't pay off the student loan. If your circumstances change you will pay different amounts off, so you could end up paying back more now that you need to. Also, it's not taken into account for any further loans etc so it basically just sits in the background. Payments to a CC would most likely be higher.

    For context - I am 6 years on from Uni, have a mortgage, credit card etc and just have my student loan taken out almost like an additional bit of tax. I also earn similar to you so can relate to the payments.

    In addition, as others have said, you would struggle to get a card for anything like that amount. My first was a £1500 limit and I now have up to 10k limits but that's a few years on.

    If you want to build your credit I'd suggest trying for a card with your bank and if they can't help try a credit builder brand. An eligibility checker on here will be able to help :)
    Officially Mrs B as of March 2013
    TTC since Apr 2015, baby B born March 2017
  • SuperHan
    SuperHan Posts: 2,269 Forumite
    Part of the Furniture 1,000 Posts
    Another one to say don't clear your student loan with a credit card.


    Your take home salary will increase, but your monthly expenses will increase to offset this, so you'll be no better off anyway. Long term, you're likely to be worse off... With a student loan, you don't have to pay this in times of hardship (eg if you lost your job). Your credit card company won't be this lenient.


    Just throw any extra cash you can at your student loan if you want to pay it off quicker. Although in my opinion, that's still bad advice. You'd be better to pay off your mortgage faster/save up for a bigger deposit/put your money in a high interest account than paying off your student loan.
  • Great replies. I won't pay it off but will apply for a credit card to build up credit to build up a history and get decent limits to stooze..
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