The best student bank accounts
As we approach the start of an academic year, Ruth Jackson-Kirby rounds up what you should look for when choosing a student bank account and outlines some of the best deals.
Students across the country are preparing to start university. One key consideration is opening a student bank account.
Pick wisely and this account will help you manage your finances for the duration of your course and in the years afterwards. Banks roll out the red carpet for teenagers heading off to university because many people stick with the same bank for their current account for decades after they graduate.
This means banks often acquire a long-term customer to whom they can cross-sell many of their other products.
Prioritise your overdraft
The perks offered to students range from cash to railcards, but don’t be swayed by the freebies. This account needs to work well throughout university and beyond, so the main thing to consider is how much of an overdraft you’ll need and how long you will need it to be interest-free for.
Student bank accounts offer much larger than normal free overdraft facilities to help students through their expensive university years.
“Although a 0% overdraft can be a godsend when you’re trying to manage on a tight student budget, it is still a form of borrowing that will need to be repaid at some point,” says Andrew Hagger of personal finance website Moneycomms in The Sun.
“Once you start work you’ll need to start paying it back – however most banks offer graduate overdrafts where you can gradually repay your student debt for free over a period of two to three years.”
The best student bank accounts on the market today
If you don't need a particularly large overdraft, then Santander’s student account is an attractive option. You receive an interest-free £1,500 overdraft for three years, as long as you pay in at least £500 a term. The overdraft then rises to £1,800 if you continue studying in year four and £2,000 in year five. Moreover, you get a free four-year railcard worth £100 which gives you a third off rail tickets – perfect for taking the train between university and your home each term.
However, you can achieve the same thing with HSBC’s student account, and it has a bigger overdraft. You get a £1,000 interest-free overdraft in your first year and then you can apply to increase it to £2,000 in year two and £3,000 in year three. If you spend money on the debit card more than five times in the first 30 days, you’ll get £100 cash – which you could use to cover the cost of a railcard for four years. Even if you don’t think you’ll use your entire overdraft it could still be worth going for the largest one possible. “Even if you don’t need the full overdraft, transfer some of it to a savings account,” says student finance website Save The Student. “You can then [earn] interest on the borrowed money while you’re a student.”
The Nationwide FlexStudent current account is another option. This student account offers a similar overdraft to HSBC, with £1,000 in your first year, and then you can ask to increase the overdraft limit to £2,000 in your second year and £3,000 in your third year.
If you pay £500 into the account by 16 December, you could receive £100 cashback. If you decide to do a year abroad, then this is a good student account to opt for as it offers fee-free international banking. You must not have a current or student account account with an arranged overdraft already and you have to pay in at least £500 per term which can come out of your maintenance loan.
The Natwest student bank account offers £500 interest free overdraft in your first year and then £2,000 in years two and three. With it you get £80 cashback and a four years tastecard worth £39.99 a year (total saving of nearly £160). The tastecard gives you hundreds of discounts on big chain restaurants and cinemas in the UK which will come in handy as a student.
Make sure you register for their online/mobile banking and ask for a paper copy statement within 30 days of opening your account, so you can receive the perks.