Why open a student bank account?
For many people, university life is the first time you’re in charge of big sums of money. To really make the most of your finances, it’s important to get the best student bank account available to you.. You can apply as soon as you get your UCAS confirmation letter and it’s a great opportunity to get perks and offers that are available from student current accounts. You might also want to look at student savings accounts.
However, your first step into student banking comes with risks. From Freshers’ Week to renting a flat, your cash will flow out quicker than you can imagine! As such, it’s important to get a student bank account that not only gives you a good deal, but also makes it easy to keep an eye on your budget. Many people stick with the same bank after uni, so making the right choice now could pay off for years to come.
How to get the best deal on your student bank account
The best way to get a good deal is by using a price comparison website like Choose Wisely to compare student bank accounts. It’s likely that you’ll have a high street bank near your accommodation, or you might see a stand for a bank at Freshers’ Fair. However, these companies will be paying to get close to you, and they may not be the best bank for students.
If you’ve already signed up and you’re wondering how to switch student bank accounts, don’t worry! The current account switch service makes changing your bank account so easy that you’ll barely have to lift a finger. Over three million people have switched their accounts so far with this free service and your bank will do all the work, so you can focus on making the most of student life.
Incentives, gifts and treats
Want a great student bank account deal, but confused by the incentives? There are lots of different ways that banks and building societies encourage you to switch, but there’s really only one that you should focus on. What you’ll want is the largest 0% overdraft that you can get.
An overdraft allows you to spend more than you have in your account - the best student accounts have up to £3000 interest-free. It’s like a loan, so you’ll have to pay it off when you finish uni and start earning, but at 0% interest, so it won’t cost you anything provided you repay it on time. Other incentives include free railcards for discounted travel, Amazon vouchers and interest on your balance. It’s wise to think seriously about how much use incentives will be, before signing up for any special offer.
Many 0% overdraft offers increase over time, so you might be offered £1000 in your first year, £2000 in your second year and £3000 in the final year. For students on longer courses, you could even get further increases after year three, but remember you’ll need to pay off any money you take out.
5 questions every student should ask before opening a bank account
- Is there a monthly fee?
- Are there budgeting tools in the app?
- Can you switch from an existing bank account for free with the current account switch guarantee?
- Can I use Apple Pay or Android Pay on my phone?
- How long will I be given to pay off the 0% overdraft after uni?
Student overdrafts explained
Your credit score is pretty important when you’re applying for a student current account.If you’re not sure what it is, the video below should help. Banks advertise 0% overdrafts as either ‘up to £x’ or ‘£x guaranteed’. ‘Up to £x’ means the overdraft you’ll get offered depends on your credit score. Even if the amount is ‘guaranteed’, you’ll still need to pass a credit check to get approved for a student bank account.
Even the best bank account for students has an overdraft limit, and if you go over that, you’ll be hit with big fees and high interest rates. So if you need to borrow more money than your overdraft will allow, our Eligibility Checker tool could give you an idea of alternative loan options. Before borrowing money, check if your family can give you a hand, as you’ll usually find it’s cheaper.
Overseas student bank accounts
If you’re moving to the UK to study, you probably won’t be accepted for a student account with an overdraft. Instead, look for basic bank accounts or international student bank accounts, like the ones from Barclays, Santander and Natwest, for example. It’s a good idea to get a bank account based in the UK, as it’ll make paying for rent, bills and food much easier.
When to switch to a graduate account
When you finish your uni course, you’ll usually be offered the opportunity to move to a graduate bank account. This will help you pay off your overdraft, as the limit is gradually reduced, not wiped out overnight. You can take out a graduate account for up to three years after you finish your course and it’s definitely worth comparing your options and considering switching banks to get a better deal!
Mark joined Choose Wisely in 2015. He continues to work in close contact with the providers, brokers and journalists operating in the world of consumer credit.