Heading to university is an exciting milestone in many people’s lives as budding students prepare to take on the challenges and opportunities that face them. And with A Level results day having just passed, it’s once again the time of year when the organising for fresher’s week begins.
This year is no different as record numbers of young students take up their places at their chosen university. As UK universities are returning to normal following the pandemic, thousands of students are preparing to start their studies at higher education institutions.
For most students, attending university is the first time fully handling their own finances. Whilst this can be a daunting prospect, choosing the right bank account is one of the first steps to helping you manage your student finances efficiently.
So if you’re about to embark on your university adventure, this article is for you. We’ll cover the perks of having a student bank account, along with the best student accounts of 2020 and how to choose the right one for you. So, without further ado, let’s jump in!
What are the best student bank accounts?
With so many student bank accounts on offer, it can be hard to know which one to go for. To make your life easier, we’ve picked the top five best student accounts based on what they have to offer:
A favourite among students, the Santander 1-2-3 Student Current Account offers plenty of great perks for students heading off to university this September. When you sign up for the account, you’ll get a free 4-year Santander 16-25 Railcard, which gives you 1/3 off rail travel in the UK — perfect for those who want to visit home during term-time.
With this account, you’ll also receive an interest-free overdraft of £1,500 within your first three years of university, £1,800 in year four and £2,000 if you stay on to year five. In order to be eligible for this account, you will need to be 18 or over and permanently living in the UK. You will also need to pay at least £500 into the account each academic term.
HSBC’s Student Account has plenty of perks, including an interest-free arranged overdraft which guarantees a limit of up to £1,000 in your first year of university and up to £3,000 by your third year.
HSBC offers easy online and mobile banking whereby you can manage your money using your phone and make quick payments with Apple Pay, Google Pay, or Samsung Pay. You’ll also have access to discounts for Costa Coffee, ASOS, Boohoo and more with HSBC’s Home and Away offers programme.
Nationwide is offering students £100 cash if they successfully apply for a FlexStudent Account on or after 1 August 2022 and pay £500 into the account by 16 December 2022. When you set up a student account, you’ll be able to use the bank’s mobile banking app, which will make managing your student finances much easier.
Nationwide also provides you with the opportunity to apply for a zero-interest overdraft of up to £1,000 in your first year of university, £2,000 in your second year, and up to £3,000 in your third year. To keep your overdraft, you’ll need to pay a minimum of £500 into the account each term, pay any bills on time and stick within your overdraft limit.
When you graduate, your account will automatically change to a FlexGraduate Account, and you’ll keep your interest-free overdraft. This said the overdraft limit will decrease steadily over time.
Barclays is offering students a free 12-month subscription to Perlego if you apply for their student account by 30 November 2022. Perlego is the UK’s most popular e-book service for freshers, and it provides thousands of online books, academic texts and resources which will be invaluable during your studies.
The bank also provides students with an interest-free overdraft limit of £500 when the account is first opened, which can then be increased to £1,000 after the first term and up to £1,500 from year two and beyond.
Finally, the Barclays Student Additions Account is free to open and use, so you won’t be hit with any hidden costs.
When you open a Student Bank Account, Natwest will give you £80 cash and a 4-year tastecard worth £35 per year. To receive these, you’ll need to register for Mobile or Online Banking and opt for paperless statements within 30 days of opening the account.
You’ll also receive an interest-free overdraft of up to £2,000 when your application for a student account is approved. Your overdraft will start at £500, but you can apply to increase it to £2,000 after your first term at university.
How to Choose the Best Student Bank Account
The three main things to consider when choosing a student bank account are:
- The overdraft: Having access to an interest-free overdraft while at university provides a much-needed safety net for students. When choosing an account, look for the biggest and longest zero-interest one you can get, so you avoid steep interest rates when you’ve finished your course.
- The incentives: Student bank accounts come with plenty of perks, so it’s worth deciding what the best ones are for you personally. Incentives can also help you choose between similar accounts if you’re not sure which one to go for.
- Customer service ratings: To ensure you get the most from your account and receive the best service, compare customer service ratings. You’ll want to check to see what others have experienced with the bank before committing to an account.
Frequently Asked Questions
What are the advantages and disadvantages of student bank accounts?
One of the main advantages of opening a student bank account is the option for an interest-free overdraft. These can be especially useful when managing your student finances, particularly if you find yourself low on funds and waiting for your next student loan payment. Zero interest overdrafts will provide you with a safety net without the usual penalties incurred when you go into the minus on your account.
Additionally, banks want to attract new customers when they are young, so they will offer plenty of perks for students. Often, these are better than the ones on offer with standard accounts, and they are specifically tailored towards the student lifestyle. Whether you’d make use of a railcard to get you a discount on your trips home or you’d rather receive a cash incentive for signing up, there’s something on offer for most individuals heading off to university.
The third main advantage of student bank accounts is the flexibility and ease of use when it comes to managing your bank account. Student bank accounts incorporate smart banking facilities and the ability to manage your student bank account online, meaning it is straightforward to manage your student finances, whether you’re at university or at home.
It’s clear that opening a student account can provide plenty of advantages. However, there are a few things to be mindful of too. In particular, you may find it harder to open a student bank account if you have a poor credit score. If you can’t open one due to past debts, you may need to choose a basic account instead. International students may also find it hard to open a student account in the UK, or they may be ineligible for an interest-free account.
Finally, when you graduate, the terms of your student bank account are likely to change. This means you may lose some of the perks that came with your student account, and you may need to reduce your overdraft. To avoid any surprises, check with your bank prior to graduating so you can prepare for your account terms to change.
How do you open a student bank account?
To be eligible for a student bank account, you’ll need to be 18 years old or above and enrolled on a course at a UK college or university. Some banks will allow you to open a student account at the age of 17, provided you are about to be on an accepted course, but it’s not a guarantee.
When it comes to opening your student account, most banks allow students to apply for an account online, but you will usually need to post the necessary supporting documents. You can also go into your chosen bank and book a face-to-face appointment if you prefer.
When opening a student bank account, you’ll usually need the following:
- Proof of ID such as your driver’s licence or passport
- Proof of address such as a utility bill or bank statement
- Proof of your student status such as an acceptance letter from your university or your UCAS offer letter
Can you open more than one student bank account?
No, you can’t open more than one student account with the same provider. Additionally, many banks like Nationwide and HSBC also explicitly state that you should not have an existing student account with another provider when you apply for one with them.
Alternatively, other banks will allow you to have an existing account with another provider but will ask that you use theirs as your main account. However, if you don’t pay your student loan into the account, your bank reserves the right to close it.
Will I get the maximum overdraft?
Overdrafts on student bank accounts usually range between £500 and £3,000. It may be tempting to try and get the maximum overdraft possible, but it is always better to opt for what you actually need, especially as you will have to pay it back.
Many banks state that the interest-free overdrafts on their student bank accounts go ‘up to’ a certain limit. Hence, the maximum overdraft that banks offer is not guaranteed, and you may be offered a lower amount — your bank will decide this based on your credit score. Before you apply for an overdraft, it is always advisable to check your credit score online and identify any issues that may be lowering it.
It is also worth noting that many student bank account overdrafts are tiered, which means that they increase each year. For this reason, you may be able to reach the maximum overdraft amount, but it’s likely to happen during your final year at university.
What happens if you exceed your overdraft limit?
You should always avoid spending more than your interest-free overdraft limit allows. Most banks will attempt to stop any payments that will take you beyond your limit. However, if this does happen, your credit score can be impacted.
If you do need to borrow more money than your current overdraft provides, speak to your bank to try to arrange a planned overdraft. This will help ensure you protect your credit score and don’t end up with unanticipated interest costs.
What happens to your student bank account when you graduate?
When you graduate, your student account will be converted into a graduate bank account which is similar to a standard current account. You may be able to transfer the overdraft limit and its terms from your student bank account to the new graduate account to continue to use the zero-interest perk, but this will depend on the bank you use. You may also be able to apply for an arranged overdraft on top of the existing one.
This said, some banks will not allow you to transfer your overdraft over and will instead ask that you reduce your overdraft limit following your graduation from university. You can speak to your bank to discuss your options and work out the most suitable solution to your needs — your bank will look at your work status and income to do this.