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Choosing the right student bank account

Choosing the right student bank account

Category: Students

Updated: 09/01/2017
First Published: 10/08/2016

A student account will be somewhere on your priority list if you're off to university or college this year. Banks know this only too well, and will happily bombard you with their student account offers – even before the ink has dried on your A-Level certificates, expect to be targeted by the big banks to take out one of their student accounts. Is it any wonder? The future earnings and savings potential that graduates possess mean that you're hot property, and banks will be actively fighting for your custom.

Before you choose a student bank account, however, you should plan ahead rather than waiting until the last minute when you'll have much more on your mind. Comparing student accounts before you sign on the dotted line could help you save a small fortune over the duration of your course.

The ins and outs of student accounts:

A whole range of banks and building societies offer student accounts, which are just like normal current accounts, except they come with slightly different terms and conditions. So if you're planning on going to university this year, make the most of being courted by the big banks, and shop around for the best deal. Pay close attention to what's being offered - whether it's an interest-free overdraft, a rail card or a handy incentive - and you could even get an account before your A-Level results day and enjoy a couple of months of perks before starting student life!

Before you open a student account:

  • Think about how you want to operate your account. The majority of student accounts can be operated online so you can manage your money easily on a day-to-day basis. This can be very convenient if the only time you dare venture outside is to go to a lecture (or the pub!).
  • Think about how you intend to access your cash. Is there a cash machine on campus for withdrawals?
  • If visiting a branch is important to you, do some research about how close the nearest branch is to your chosen university. If you ever have an emergency with your finances, you'll thank yourself in the future.
  • Most banks in the UK offer a basic overdraft facility, but with student accounts this can vary significantly. Make sure you check how much interest-free overdraft is available (which is how much you can go into the red without being charged). This can mean the difference between financial comfort and financial hardship, so you need to get this right!
  • Look at the charges you are likely to face if you go beyond the interest-free part of your overdraft limit, as well as what you'll be charged if you exceed the limit altogether. Unauthorised overdraft charges can be particularly punishing.
  • Also think about if your account comes with a credit card. If it is used correctly a credit card can be a great help, especially when student loan payments are staggered throughout the year. Take some time to look into the different interest rates charged on credit cards.
  • You may also want to consider prepaid cards - it's worth taking a look at whether these will limit your spending to help you stay in the black.

Things to watch out for with your student account:

  • Freebies – This cannot be emphasised enough - many banks think they can bribe students with free gifts and offers, so make sure to thoroughly compare the options and don't be swayed by the lure of a good freebie. While a new iPod will may make you smile now, you'll be kicking yourself in the future if you need a bigger overdraft instead. Commission-free foreign currency is all very well if you happen to be going on holiday, but a young person's railcard can save you a small fortune if you ever need to travel home. The message is clear: make sure you weigh up the benefits first and pick an account that suits your longer-term financial needs, rather than one purely based on a free gift.
  • Some student bank or building society accounts will also revert back to their standard current account as soon as you graduate. If like the majority of graduates you are overdrawn and in debt, you could find yourself in even more financial trouble, so make sure to see what your potential bank's long-term overdraft or graduate facilities are like, too.

If you do find yourself in financial difficulties, you won't be the only one. Don't bury your head in the sand, though, as it will only make things worse – many banks on campus will have a student finance officer that you can speak to, so make the most of this free service as it will help you stop worrying about money and let you concentrate on your studies.

What Next?

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This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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