Best Student Bank Accounts 2018
Looking for a student bank account? We have lots of tips for finding the best student bank account this year.
As the first term of university approaches, it's easy to put thoughts of your finances to the back of your mind.
However, you should consider carefully which bank will see you through your years as an undergraduate, as they attempt to attract you with their huge 0% overdrafts and offers of cool freebies.
Your choice of lender could affect your financial situation significantly, so read our guide to student banking to help you choose the best one for you.
What is a student account?
The main difference between a student bank account and a standard current account is the interest-free overdraft.
Students can have access to up to £3,000 without paying any interest. However, as a student you are only allowed to have a student account and no other current accounts, so unfortunately there’s no chance to snap up the freebies at all the banks!
When should I open my student account?
You can open your student account as soon as you receive an offer letter from UCAS, either conditional or unconditional – you don’t have to wait until you’ve started term at university.
To open an account, you will need proof of your home and term time address, and some sort of identification such as a passport, driving licence or birth certificate, as well as your UCAS letter.
You may also need some proof of income, such as a statement of your financial arrangements or a payslip.
How do I pick the best account?
When choosing your student bank account, it’s best to focus on what is being offered.
Choose the one with the biggest overdraft
The most important factor to consider is which bank will give you the biggest and longest 0% overdraft facility.
All student accounts provide an overdraft if required – this means you can withdraw more money than you actually have, i.e. borrow it. To ensure you are borrowing as cheaply as possible, choose the account that has the lowest interest rate available. This is because the lower the rate is, the less your debt will cost you.
As long as you stay within your overdraft limit, you can safely borrow money interest free – this is why you should check to see which bank offers the most 0% borrowing for the longest period of time.
However, overdrafts still have their disadvantages if you’re not careful with your spending, so be aware of the following:
Exceeding the agreed overdraft limit without permission
If you do this, your cost will go through the roof, as you will incur interest and penalties. Whilst you may be able to reclaim any bank charges for overdrawing, it’s not usually easy. So always talk to your bank first, as a mistake on your part could lead to credit rating problems in the future.
Borrowing more money than you need
Although you may not be paying interest on anything you are borrowing, you still have to repay everything you borrow once you finish university. Only borrow the necessary amount and not any more, as you will have to pay for these debts when you graduate. So take the time to budget your money carefully, and avoid spending more than you need to.
What about the freebies?
These should only be considered second to the overdraft facility available, though can be a deciding factor if two or more banks are offering similar overdrafts.
Keep in mind that banks are only offering these gimmicks because they believe that most customers won’t bother switching accounts once they have signed up, and so a few pounds of freebies will guarantee them your business for your whole life. However, once you’ve taken advantage of their free stuff, remember to switch to a graduate account.
Most banks require you to deposit your student loan or source of main income in their account, so the chance of opening multiple student accounts to grab all the freebies is somewhat limited.
What if I don’t need to borrow money?
If you’re lucky enough to be in credit while studying and have a monthly income of £500+, you can opt for an account such as the TSB Classic Plus Account that offers up to 5% AER on your balance.
However, there is also the chance to make a profit by choosing the account with the biggest 0% overdraft, keeping as big a negative balance as possible within your 0% limit, then putting this money in the best instant access savings account. Any interest earned will be tax-free for most students, and when your overdraft limit is reduced, move the appropriate amount of cash back to your current account.
This means you can earn interest on money the bank lends you for free, and you can earn hundreds of extra pounds during your course if done correctly.
Best student accounts
These are the banks offering the biggest 0% overdrafts – although they compete with each other by offering larger overdraft limits, in reality, not all students will be allowed to have them.
So although overdraft sizes are important, they are not the only factor you should consider when choosing your account.
Halifax and HSBC
The biggest 0% overdraft you could potentially get is from Halifax or HSBC. With this you can get a huge maximum interest-free overdraft of up to £3000 every year.
However, this is only an upper limit, and it has been found to be unlikely you will get the full amount immediately or at all during your course. To get the £3000 you have to request it, and even then it is not guaranteed – it also depends on a credit score.
Don’t let this put you off too much though – it’s still the biggest 0% overdraft around, and remains interest-free a year after you’ve graduated too.
Halifax offer commission-free foreign currency and traveller's cheques - so you can make the most of your money if you fancy a study break.
HSBC have a variety of discounts available on technology, travel, entertainment, food and retail.
The Co-op Bank offer overdrafts of up to £1,400 in year one, £1,700 in the second year and £2,000 in the third.
This isn't as big as the potential overdrafts from Halifax and HSBC. However, you are more likely to get the full overdraft amount than from other banks, provided you pay in your student loans, don't incur any bank charges, and ask for the overdraft increase at the beginning of each year.
The Co-op Bank also has a good track record on customer service.
In addition to a possible £1,500 overdraft for three years, Santander offers Student Current Account holders a free four-year Young Person's Railcard which gives one third off of most rail travel in Great Britain.
The card normally costs £120, so this could be an attractive account if you know you will be travelling lots by train.
You will need to pay £500 into the account each term and register for online banking.