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Student Bank Accounts

Fiona Leake
Fiona Leake
  | Edited by Tom Church
Updated 29th March 2021

Managing your finances as a student is incredibly important which is why we’ve gathered the best student bank accounts available at the moment. This guide will help you to compare student bank accounts and find the one that suits your needs best. Thankfully, banks like to offer students great deals like 0% overdrafts and railcards. Read on for everything you need to know about student bank accounts.

What is a student bank account?

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A student bank account is simply a bank account that’s designed for students! It works in the same way as normal bank accounts, you pay money in and out and you can use a card to make purchases. However, student bank accounts tend to come with additional benefits such as interest-free overdrafts. 

The reason these extra benefits are offered is because the banks understand that as a full-time student it’s unlikely that you’ll be earning a regular wage. 

Why do I need a student bank account?

It’s a good idea to open a bank account as a student as it’s a great way to manage your finances. You can organise your budget and have easy access to your money. Not to mention all of the great benefits banks offer students. 

We’ll dive further into the pros and cons of student bank accounts later on in this guide. 

Am I eligible for a student bank account?

To be eligible for a student bank account you need to be able to prove that you’re a university student. This can be done using an unconditional offer or a letter from your university confirming your place. 

How to choose the best student bank account 

There are some things you need to look out for and tricks you should know about before choosing the best student bank account for you: 

1. Find the biggest 0% overdraft

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As a student, you’ll likely need to access an overdraft at some point. An ‘arranged overdraft’ is a way of borrowing money through your bank account. What’s great about student bank accounts is that you can borrow money via an overdraft at 0% interest. This is unique to student bank accounts.

Pick the student bank account that offers the largest 0% overdraft. Usually, the limit is around £3,000. This way, you know you have access to this money in an emergency. However, just because it’s there doesn’t mean you should spend it! It’s only to be spent when needed as you do have to pay it back at some point. 0% interest doesn’t last forever and once you’ve left university, you’ll need to pay it back before the high-interest rates kick in.

2. Choose a ‘guaranteed’ overdraft not ‘up to’

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Be warned, some banks might offer larger overdrafts but it’ll be ‘up to’. This means that you might not be able to access the full amount. It’s best to choose the highest ‘guaranteed’ overdraft to ensure you’ll have access to it all. 

For many banks, an overdraft advertised as ‘up to’ means you won’t be able to access the full amount until you’re in your final year or if you have a very good credit rating. 

3. Find out the length of the overdraft and repayment conditions

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The 0% interest period on a student overdraft doesn’t last forever. Typically, it lasts for a few years after graduating. Compare the length of the 0% overdraft between different student bank accounts and find a length that suits you.

Also, you need to understand the repayment conditions. You don’t want to be suddenly demanded that you pay £3,000. Plan ahead and find out when the overdraft needs to be repaid before interest is added. Usually, you won’t be required to repay until after you graduate. 

Remember, the overdraft should be treated as an emergency fund and not your money to use as you please. You do have to pay it back and definitely before interest kicks in! 

4. Remember: you need to be 18 to use an overdraft

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You need to be 18 or older to get an overdraft as, by law, banks aren’t allowed to lend money to anyone younger. Some banks might allow you to open a student account at 17 years old but you won’t be able to access an overdraft until you’re 18.

5. NEVER go over your overdraft limit

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This rule doesn’t just apply to student bank accounts but to all bank accounts. Never go over your overdraft limit as you’ll be charged interest and you can be charged for payments that fail to go through. 

Make sure you set a student budget and stick to it. This way, you’ll never have to go past your overdraft limit. Ideally, you’ll hardly have to use your overdraft at all! 

6. Beware of student bank account freebies

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Student bank accounts are very competitive and so some might have some tempting freebies on offer such as free products, cash rewards and travel discounts. 

However, freebies are the second thing you should look at after finding the best overdraft. A student bank account offering a £50 cash reward pales in comparison to a student bank account offering a large 0% interest overdraft for several years. 

Sometimes, freebies are offered to distract you from the poor overdraft offering.

The overdraft is the most important thing. Once you’ve narrowed down your search to the two best student bank account overdrafts, you can then compare freebies. 

7. Student bank accounts WILL carry out a credit check

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When you apply for a student bank account with an overdraft, it’s a form of borrowing which means you’ll be credit checked. The bank does this check to make sure that you’ve got a strong score and will be able to repay what you borrow using the overdraft. 

However, as a student, it’s unlikely that you have much of a credit history and so your credit score might not be very strong. 

You can find out how to improve your credit score here.

8. Don’t be tempted by the closest bank branch or ATM

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Don’t pick a student bank account based on convenience if you have a local branch or ATM just outside your doorstep. You don’t usually have to go into a branch to set up an account and you can withdraw cash from any bank at an ATM. 

Instead, compare the best deals and find the best student bank account for you.

How to open a student bank account

Most banks will allow you to apply online for a student bank account. This is usually a quick and easy process. You’ll just have to follow the steps listed on the bank’s website. 

Once your new account is created, make sure that you update Student Finance of your new bank account details. You can easily do this online. 

You’ll need to provide ID and proof that you’re a student to open a student bank account, we explain this below:

What do I need to open a student bank account?

You’ll need to provide supporting documents to be accepted for a student bank account. These must be original documents, not photocopies, which means you’ll either need to post them or take them to your local branch. 

This is what you’ll need to provide:

  • Photo ID - a passport and/or driving licence.
  • Proof of address - a recent utility bill or bank statement.
  • Proof of student status - letter of acceptance from your university or a UCAS offer letter.

Can I switch student bank accounts?

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You can switch from a normal bank account to a student bank account as most banks are part of the Current Account Switch Service (CASS). This means you can open a new student account and use the bank's switching service to close your old account and move your money over. 

You can also usually switch from one student bank account to another. Just check with your bank before doing so. Some banks will only allow new students to open a student bank account. Also, before you switch, make sure that the new student account offers the same incentives and a long 0% overdraft. 

How many student accounts can I have?

Whilst you can open multiple current accounts and savings accounts, usually, you can only open one student bank account due to the perks on offer. This means that you can’t open multiple student accounts with the same bank. You can’t own multiple student accounts across different banks either as they explicitly say you shouldn’t have a student bank account already when applying for one. 

The main reason why you can’t have more than one student bank account is that you receive the perks and large 0% overdraft based on the fact that your Student Loan is paid into that account. If you have more than one student bank account, this wouldn’t be possible. 

Should I get a student bank account?

Before deciding whether a student bank account is for you, let’s weigh the pros and cons:

Pros of student bank accounts

  • No account fees.
  • Large overdrafts with 0% interest.
  • Long overdrafts usually last the duration of your course.
  • Freebies that appeal to students. 
  • Student overdrafts are cheaper and easier than borrowing money on a credit card or loan.
  • You can usually switch student bank accounts at any time if you find a better deal. 

Cons of student bank accounts

  • If you never use your overdraft, it might not be the best bank account for you.
  • There may be a requirement to deposit a certain amount of money each term. 
  • Using the full overdraft might land you in financial trouble if you don’t pay it back before the end of the 0% interest period. 

Student bank account overdraft warnings

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Here are some things to keep in mind when using your student overdraft:

  • An overdraft is a form of borrowing - you will have to pay it back
  • The 0% interest period doesn’t last forever - pay back your overdraft before high-interest charges are added. 
  • If you don’t pay back your overdraft you’ll be in debt and this could negatively affect your credit score
  • Beware of the repayment rules, you might suddenly be asked to repay the full £3,000. Plan ahead and budget.

An overdraft isn’t free money. Don’t treat it as such and only use it if you need to.

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