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Choosing the right student bank account

Choosing the right student bank account

Category: Students
Author: Lieke Braadbaart
Updated: 14/09/2018

Whether you are moving away from home and choosing your first ever bank account, or are looking to make the most of being a student by switching to the best student bank account for your needs, this guide can help. Not only does it answer some of your most frequently asked questions, but we've also gathered together a list of student bank accounts to make the search for your ideal account a little easier.

On this page:

Why should I get a student account?

Student current accounts are an essential accessory for anyone heading off to university. Even if you don't think you'll get a part-time job or student loan, you'll need somewhere to hold your money, and mattresses aren't as safe as they once were... Especially given the ease of contactless and the various budgeting options on offer, it's easy to see why you'd want a bank account if you don't already have one.

So, why a student account? Well, not only can these accounts offer great deals on railway travel or other attractive bonuses, they usually come with low or even no overdraft fees. That means that if you end up spending a bit more than you have in your bank account, you won't have to worry about fees and interest adding to your debt.

As with any kind of financial decision, there are some advantages and disadvantages to consider:

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Pros

  • Usually no account fees to pay
  • Often come with freebies designed to appeal to students
  • Some may pay you interest on the money you have in the account
  • No or lower than usual overdraft fees
  • Student overdrafts are generally much cheaper and easier than borrowing on a credit card
  • Can switch at any time if you find a more competitive deal
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Cons

  • May not be the most competitive for those who never go into the red
  • May come with certain requirements, such as to deposit a certain amount per month/every few months
  • Improper management could have a negative effect on your credit rating
  • If you don't take note of the end of the 0% overdraft term, you could risk staying in the red once you graduate and start having to pay high fees

What is an overdraft?

An overdraft on a current account is the amount you can go below £0. So, if you have an overdraft of £3,000, that essentially means you'd be able to borrow £3,000 from the bank to cover your spending.

There are two types of overdraft: arranged and unarranged. An arranged overdraft is, as the name implies, a debt that you warn your bank or building society about beforehand. An unarranged overdraft happens when you don't mean to dip into the red or exceed your arranged overdraft limit.

Naturally, unarranged overdrafts tend to come with higher costs than arranged ones, with fixed fees and/or a certain percentage of the debt adding to your balance as long as you stay in the red. This means if you're not careful, you could end up owing a lot more than you've spent, which may make it hard to get back into the black.

Overdrafts on student bank accounts

Student bank accounts are special, in that they normally don't charge any fees on arranged overdrafts. So, if you agree with your bank that you can go £2,000 overdrawn, for instance, you'll have this buffer for the entirety of your university career, and you won't have to worry about fees unless you exceed that limit.

Some providers will offer tiered overdrafts that increase your limit over the years – as long as you've used it responsibly – so you'd be able to borrow more over time, while others will keep the amount you can borrow the same. When deciding, you'll also have to take into account that some providers will only give you the buffer for the length of your university course, while others will give you some more time to get back in the black after your course has ended.

Another important factor to note with any 0% overdraft offer is that the interest-free overdrafts advertised by banks and building societies aren't always the amount you will be able to borrow. Many will mention the maximum overdraft customers can get, with the actual amount depending on your credit rating.

Once you've passed the credit check and know what your arranged overdraft is going to be, you'll need to keep an eye on your student account balance. By checking it regularly, you can ensure you both keep your account (some providers may switch you over to a regular current account if you don't pay in a certain amount per term) and don't exceed your limit.

While overdrafts during university may be exceptionally cheap, that doesn't mean your overdraft will stay affordable after the end of your course. That's why you may want to start thinking about how you'll get out of the red in the last year of your study, to give you plenty of time to repay your debt.

How do I choose the best student bank account?

What may be the ideal account for one student could work very differently for another. That's why it's always a good idea to figure out for yourself what you want from a bank account, and how you think you'll use it, before you start comparing accounts. To help you with that, here are a few things to consider:

1. Overdraft versus freebies

It may be tempting to pick the account with the generous Amazon voucher, especially if you're moving out of your parents' house for the first time and have things to buy for your student accommodation, but this could prove a disadvantage over the long term. Railcards or coach cards, which allow you to travel at heavily discounted rates, offer more long-term benefits, as do free NUS Extra cards or cashback offers. However, you'll have to weigh up what you need more.

You can get your own railcard or NUS Extra card. What you won't be able to get yourself is a decent overdraft deal. That's why you should consider how much you think you're likely to go into the red by and use that to determine which deal could be best for your needs.

2. 'Up to' versus guaranteed overdrafts

Once you've determined whether or not you will need a student account with an interest-free overdraft, it's time to think about what kind of overdraft will work best for you. As we've already said, some providers offer a tiered overdraft that increases over the years of your study, so you may be able to borrow £1,000 in your first year, £2,000 in your second year and then £3,000 in your third year for instance.

If you think that your costs are going to go up the longer you study, this could be an excellent choice. However, this also means that by the end of your degree, you might be quite a bit in the red, which could be dangerous if you don't know how you're going to repay the debt. For those who don't want to take that risk, or who want a larger overdraft straight away, a stable, 'guaranteed' (depending on your credit score) overdraft could be a better way to go.

3. Location, location, location

With mobile banking becoming increasingly popular, where your bank is located may not be a big concern, but if you ever have a question or need to handle cheques, you may want to see what provider has a branch near your campus. Likewise, you shouldn't take it for granted that all banks now offer online and mobile banking as standard – check account management options before you decide.

4. Don't forget about the basics

Finally, don't forget to look past all the glamorous incentives to make sure that the account actually does what you want it to do. This doesn't mean just being able to give you a contactless debit card, for instance, but also the option to set up direct debits (such as for your mobile phone bill) and whatever else you may need.

Selection of student accounts

To help you find a suitable account, we've gathered together a selection of top student bank accounts available to all UK residents. Compare these student bank accounts for yourself to see if your ideal product is among them (information correct as at 14.08.2018).

Provider and account Interest-free overdraft Incentives
Bank of Scotland
Student Account
Year 1 - up to £1,500
(0-6 months £500,
7-9 months £1,000
and 10 months+ £1,500)


Year 2 to 3 - up to £1,500

Year 4 to 6 - up to £2,000
  • Free to register for Everyday offers and It's On Us
  • Earn up to 15% cashback from selected retailers
  • Receive a free NUS Extra card, valid until 30.09.2019, when you open an account before 31.10.2018
Barclays Bank
Student Additions
Year 1 - up to £1,000

Year 2 - up to £2,000

Year 3 - up to £3,000
  • Earn cashback through Barclays SmartSpend
  • Blue Rewards is available as an add-on for £3pm
Halifax
Student
Year 1+ - up to £1,500
  • Cashback Extras - Earn up to 15% cashback from selected retailers
  • Credit interest of 0.10% AER/gross
HSBC
Student Bank Account
Year 1 - £1,000

Year 2 - up to £2,000

Year 3 - up to £3,000
  • Access to Student Exclusives - offers and discounts
  • Commission-free foreign currency
  • £80 Amazon.co.uk voucher if you apply by 31.12.2018
  • 12 months Amazon Prime Student if you apply by 31.12.18
  • Preferential savings rates
Lloyds Bank
Student
Year 1 - £1,500
(0-6 months £500,
7-9 months £1,000,
and 10 months+ £1,500)


Year 2 to 3 - up to £1,500

Year 4 to 6 - up to £2,000
  • Free to register for Everyday offers and It's On Us
  • Earn up to 15% cashback from selected retailers
  • Receive a free NUS Extra card for up to three years when you open this account before 31.10.2018
Nationwide Building Society
FlexStudent
Year 1 - up to £1,000

Year 2 - up to £2,000

Year 3+ - up to £3,000
  • Simply Rewards - Earn cashback from selected retailers
  • No charges for using debit card abroad
  • Credit interest of 1% AER/gross (on balances up to £1,000)
NatWest
Student
Year 1 - up to £2,000
(1-4 months £500,
5-6 months £2,000)


Year 2 to 5 - up to £2,000
  • Choose one of the following: Amazon Prime Student one-year membership and £10 Amazon.co.uk gift card; National Express Coachcard valid for four years; or tastecard valid for four years
  • Free 24/7 Emergency Cash Service
Royal Bank of Scotland
Student
Year 1 - up to £2,000
(1-4 months £500,
5-6 months £2,000)


Year 2 to 5 - up to £2,000
  • Choose one of the following: Amazon Prime Student one-year membership and £10 Amazon.co.uk gift card; National Express Coachcard valid for four years; or tastecard valid for four years
  • Free 24/7 Emergency Cash Service
Santander
123 Student Current Account
Year 1 to 3 - up to £1,500

Year 4 - up to £1,800

Year 5 - up to £2,000
  • Free 16-25 Railcard for new customers, valid for four years
  • Earn up to 15% cashback from selected retailers
  • Preferential rates, offers and discounts at 123 World
  • Credit interest of up to 3% AER (2.96% gross) on balances up to £2,000
TSB
Student
Year 1 to 3 - up to £1,510
(0-6 months £510,
7-9 months £1,010,
and 10 months+ £1,510)


Year 2 to 6 - up to £1,510

Year 3 to 6 - up to £1,510
  • Credit interest of up to 5% AER (4.89% gross) on balances up to £500

Source: Moneyfacts.co.uk, correct as at: 14.08.2018

Eligible deposits with UK institutions are protected by the Financial Services Compensation Scheme up to a maximum level of protection of £85,000 per person per institution.

All overdrafts are subject to the applicant's status. You may not be offered credit. All rates and fees are subject to change without notice. Please check all rates and terms before borrowing.

Moneyfacts.co.uk Limited is an independent credit broker, not a lender. We will receive a payment from credit providers where customers link to them from Moneyfacts.co.uk. None of these arrangements affect our independence.

What do I need to open a student bank account?

Opening a student bank account is a pretty straightforward process. All you need is proof of your identity, proof of your address, and proof of your status as a (soon-to-be) student. Many banks and building societies will accept an unconditional offer letter as proof of your status, or even simply your UCAS number. However, some will require a bit more proof, so do your homework before stepping into a branch or starting your online application.

Remember that to get the best deal, you will also need to make sure your credit rating is up to scratch, as providers will perform a credit check. Get a report yourself before you apply, so you know what your score is, and make sure you've done what you can to improve your rating if necessary.

Most students entering or in higher education who fit all the above criteria should easily be able to get a student bank account, even if they are considered mature. Some courses are excluded, however, and for more complicated cases, such as postgraduate students (who only have one or two years of studying ahead of them), part-time students or Open University learners, you may need to contact the bank yourself to ask if you're eligible. This may even work out for the best, as some offer specific postgraduate student accounts.

Note that almost all banks do not count apprentices as students for bank account purposes and that it is not possible to have more than one student account at the same time. Finally, due to some banks requiring just an offer letter but others requiring written proof that you can only obtain after you're started, you'll want to take into account when you want to open your student account when deciding on a product.

Can I switch student accounts?

While you can't have more than one student account at a time, there's nothing stopping you from switching to a better deal if one comes along. That's why it may be a good idea to keep an eye on the available student accounts throughout your university days, in case something catches your eye.

Do note that every time you apply for a new account, unless you're applying for a guaranteed bank account, the provider will run a credit check, and this will show up on your report. So, moving between bank accounts too many time may adversely affect your credit score.

What happens after I finish my course?

After your course is finished and a certain amount of time has passed (this varies between providers), your account will be automatically changed into either a 'normal' current account or a graduate account. A graduate account would be the preferred choice here, as it means you will have a little longer to get back into the black, with most graduate accounts decreasing your 0% overdraft amount gradually over time.

Just as you can move to another student account if you find a better deal, you don't have to stay with the same provider when your student account changes over. In fact, it's a good idea to look around when you're nearing the end of your studies, to try and find the best graduate account out there for your needs. Or, if you're planning to continue your studies, you could opt for a specific postgraduate account instead.

You can find out more about graduate accounts in our guide on the subject. Alternatively, if you can't find a good account with a 0% overdraft deal or you're still in the red when your graduate overdraft runs out, you could look for a credit card with an introductory 0% on money transfers to get your overdraft debt out of your current account and onto a card that gives you a little more time to pay it off without charges (except for a transfer fee) adding to the debt.

If you don't think you'll need an overdraft, and would rather get a high interest rate than a free railcard or Amazon voucher, you could have a look at the top high interest bank accounts as an alternative.

Recent graduates (or those nearing their graduation) may want to look at some of our graduate-specific guides or our graduate bank account page.

For those looking for more money tips, we have just the guide for you.

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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