Best Student Bank Accounts 2021

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 and what do I need?

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 a student bank account you will need:

  • One or two forms of photo ID: such as a passport or driver's licence
  • Proof of address: such as a recent utility bill or bank statement
  • Proof of student status: a letter of acceptance from your university, or UCAS offer letter.

Most banks now allow you to apply online for a student bank account, but you will still have to send off supporting documents or take them into your local branch. Documents must be original copies, not photocopies.

Once you've opened a new account, be sure to update Student Finance of your new bank account details (you can do it online).

Tips for picking the best account

When choosing your student bank account, it’s best to focus on what is being offered and make sure you always read the small print.

Consider the following points when making your choice:

1. 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:

2. Is the overdraft "up to" or "guaranteed"?

The advertised student 0% interest overdraft is often the maximum they offer (hence the "up to" wording).

For many banks, this amount is only available in your final year at university and only to students with a decent credit rating (see below).

3. Don't exceed 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.

4. Don't borrow more 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.

5. Check the repayment conditions

Sure, you probably won't have to repay your overdraft until after you graduate, but the sudden demand for £3,000 could be quite a shock!

So don't treat it as free money and plan ahead, which starts with understanding the conditions.

Most banks automatically turn your student account into a graduate bank account which deals with repaying your overdraft over a certain period.

6. Improve your credit score

Student account overdrafts are a form of borrowing, so you'll be credit scored when applying.

The quality of your score can determine how much overdraft you'll be offered.

You can raise your chances of approval by knowing your own credit score and taking action to improve it.

7. Beware of 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 bank accounts 2021/22

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.

1. Nationwide FlexStudent Account

Nationwide offer a flexible, interest-free and fee-free arranged overdraft on their current account.

You'll start off with a £1,000 arranged overdraft limit in year 1, rising to £2,000 in year 2, and £3,000 in year 3.

You will also get 1% AER/gross p.a. (variable) on balances up to £1,000.

2. Santander 123 Student Current Account

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.

There is a 0% arranged overdraft fee, although you will need to pay £500 into the account each term and register for online banking.

3. HSBC Student Bank Account

First year students get a £100 incentive when you sign up for an account with HSBC, along with a bunch of other freebies, or Student Exclusives.

You'll get an arranged overdraft offer of at least £1000 interest free on account opening, with the option to increase your arranged overdraft as your studies continue.

4. Natwest Student Bank Account

With Natwest, you'll receive an interest-free overdraft of up to £2,000 (£500 in your first term), and the choice of a special offer, including:

5. Barclays Student Additions Account

At Barclays, you can apply for an overdraft of up to £500 (fee-free) when you open your account and you can increase it to up to £3,000 in your third year (subject to status and lending criteria).

You can also get cashback from participating online and high-street stores.

6. Lloyds Student Account

Lloyds offer a fee-free tiered arranged overdraft of up to £1,500 in Years 1 to 3 and up to £2,000 in years 4 to 6.

As long as you stay in credit, you won't have to pay any monthly fees.

Extras include up to 15% cashback with their Everyday Offers and It's On Us scheme.

7. RBS Student Bank Account

RBS offer an interest-free overdraft of up to £2,000 (£500 in your first term).

There are no monthly fees, and like Natwest, offer the choice of three special offers, including the Tastecard, Amazon Prime Membership and National Express Coachcard.

8. Halifax Student Current Account

Halifax offer a fee-free arranged overdraft up to £1,500 for the length of your course, plus an extra year after you graduate, up to a maximum of 6 years.

You'll also get cashback when you spend once registered for Online Banking and you've activated Cashback Extras, as well as credit interest on any credit balance 0.10% AER (0.10% gross) variable.

Any interest is paid monthly and there are no fees for maintaining the account.

9. TSB Student Bank Account

With TSB you will receive 5% AER .89% gross variable interest on balances up to £500, paid by the 10th working day of each month

They also offer an interest and fee-free tiered arranged overdraft (subject to application and approval) of up to £1,500 (starting with £500 for the first six months).

You can then apply to increase it to £1,000 in months seven to nine and from month ten up to £1,500.

You'll be given the opportunity to apply for a Student Credit Card too. But remember - the balance will still need to be paid at the end of each month!

Further information

For more help and advice on getting through Freshers' Week, please see: