Student Bank Account Guide 2017

best student accounts 2017

Picking a student bank account can be really complicated. It’s likely that this is the first time you’ve had to make a big financial decision and it’s important that you don’t just pick the same bank as your parents or stick blindly with the bank you’re at - because it may cost you down the line.

One of the first and most important things to note about student accounts is that overdrafts are NOT free money. They are loans that you will have to pay back eventually. Therefore, the less you borrow is the less you’ll have to pay back later.

With this handy guide, we’ll show you exactly what you need to look for and explain how to avoid unexpected fees.

In brief:

Bank Interest free overdraft amount Freebies Catch

Santander student bank account

£1,800 in years
1-3
£2,000 in years 4-5
4 year railcard offering up to 1/3 of rail ticket prices £5 a day fee if you exceed your overdraft limit

hsbc student bank account

Up to £3,000 £60 Amazon gift card and 1 year Prime student membership 2.75% interest fee on foreign purchases

halifax student bank account

Up to £1,500

No freebie

£1 a day fee if you exceed your overdraft limit

RBS student bank account

Up to £2,000 4 year National Express Coach card, offering 1/3 off coach prices £6 fee for every payment that exceeds your overdraft limit

natwest student bank account

Up to £2,000 4 year National Express Coach card, offering 1/3 off coach prices £6 fee for every payment that exceeds your overdraft limit

barclays student bank account

Up to £3,000 Cash back from top retailers such as Amazon and Apple No charge for exceeding overdraft, only an £8 fee for unpaid insufficient funds

lloyds bank account

Up to £1,500 No freebie 8.21% interest rate on the amount you exceed your overdraft

tsb student

Up to £1,500 No freebie 0.66% a month interest rate and 8.21% a year on amounts that exceed your overdraft limit

nationwide student options

Up to £3,000 No freebie No catch!

Scroll down for more in-depth information and a break down of what each bank offers.

Why get a student account over a normal current account?

The biggest benefit to getting a student bank account over a normal everyday current or savings account is the 0% interest overdrafts. This is the only time in your life you’ll be offered a 0% overdraft.

Here’s a breakdown of what this actually means:

What is an overdraft?

An overdraft is a lump sum of money that you can borrow through your bank. So, for example, if you have £500 of your own money in your account, and an overdraft of £1000, you will be able to spend up to £1500 should you need to.

Overdrafts are typically used for: an unexpected bill, an emergency expense or rent. It's a convenient way of accessing extra money when you need it quickly. (A lot of students use their overdrafts for monthly bills, rent and deposits for second/third year housing).

What does a ‘0% interest’ overdraft mean?

0% interest is the reason you would get a student overdraft rather than a regular overdraft. Eventually, you have to pay an overdraft back, as it is borrowed money from your bank. Normally you would have to pay back the amount you borrowed plus interest.

However, most student bank accounts will offer you an overdraft with 0% interest (that is - no interest), so you will only pay back the amount you used, without interest.

Therefore, if you had an overdraft of £1000, you would only pay back £1000 (or however much of the £1000 you used). This also means that if you do go over (to an arranged limit), you’ll avoid hefty fees.

Will I ever get charged for my overdraft?

You will not be charged for going into your 0% interest overdraft, you will only ever be charged if you go over your agreed overdraft amount.

However, once you have graduated, depending on your bank account, you will have to pay back your overdraft with interest, but you don’t have to worry about this until you have finished university.

If you go over the agreed amount of your overdraft, it’s likely you’ll be charged one of the following:

  • Interest

e.g. If you exceed your £1000 overdraft by £200, you will pay a daily interest on the £200 (such as 1% interest, which would be £2 a day) until you have paid back the £200

  • Daily fees.

e.g. If you exceed your £1000 overdraft by any amount, you’ll be charged a capped fee of £5 a day, for example, until you go back under the limit.

  • Monthly fees

e.g. If you exceed your £1000 overdraft by any amount, you will be charged a capped monthly fee of, for example, £12.

  • Some banks will give you a ‘buffer’ amount to allow you time to get out of your overdraft

e.g. a £10 buffer. So if you spent £1010, you would not be charged any fees or interest unless you spent more than £10. However, some banks will take advantage of your spending, and will charge you regardless of the amount.

  • Declined

e.g. If you exceed your overdraft, some bank accounts will prevent you from using your account at all until you are back within the agreed limit

  • If it looks like you are going to go over your overdraft, then you can call up your bank to extend your overdraft OR to negotiate the fees.

What if I don’t need an overdraft?

Some people are lucky enough not to need an overdraft, as loans, savings and money from elsewhere is enough to cover all the necessary costs of university.

However, it might be wise to still consider potentially getting one. This is the only time in your life you’ll be offered a 0% overdraft.

Don't get sucked in by the freebies (such as free railcards)

Banks really want you to join them. As a university student, it’s likely you’ll be depositing a large amount of money into an account, so you’re going to be offered freebies to tempt you into picking a particular bank. Such as Santander’s offer of a 4 year railcard.

student bank account freebies

BUT, remember - freebies are often masks to distract you from nasty overdraft fees and interest, so be careful. The most important things are the size of the 0% overdraft and the charges if you go over it.

How do I open a student bank account?

For most student bank accounts it’s best to go into your local branch of your chosen bank and set things up there. This way you can discuss your best options and overdraft possibilities.

What do I need to open a student bank account?

You’re going to need:

  • One or two forms of photo ID (passport/driver’s license)
  • Proof of address (bank statement and bills)
  • Proof of student status, which is your letter of acceptance from your university or UCAS offer letter.

how to open student account

Here's a breakdown of what each bank offers in more detail:

Here's a closer look at what each bank in the table above actually offers.

Santander

  • Overdraft amount (interest free): You automatically get a £250 overdraft when you open the account, then up to £1,800 in year one to three if you put a minimum of £500 a term in your account. It goes up to £1,800 in year four and £2,000 in year five.
  • What’s the freebie? A four-year 16-25 Railcard (worth about £90)
  • Is it guaranteed or ‘up to’? ‘Up to’
  • Credit check? Yes (it says most people will get the full £1,500 after a full credit check).
  • How much is it if you go over your overdraft? £5 a day if you go over your agreed overdraft limit, but capped at 10 per month, and paid/unpaid fees: £5/£10 per item
  • this is the highest fee amongst student bank account options
  • In-credit interest: 1% for £100+, 2% for £200+, 3% between £300 and £2,000

Very helpful Key facts document

Find out more here.

Contact: 0800 912 3123

HSBC

  • Overdraft amount (interest free): You’ll get £500 initially, then up to £3,000, and there is no overdraft ‘set up’ fee
  • Is it guaranteed or ‘up to’? ‘Up to’ - it has the “biggest” 0% overdraft, but we’ve heard that students rarely get that amount.
  • What's the freebie? £60 Amazon gift card and 1 year Prime student membership
  • Credit check? Yes
  • How much is it if you go over your overdraft? You can’t go over your arranged overdraft, so no horrible charges. If you try to make a withdrawal at any HSBC cash machine that would take you over your overdraft limit, you'll get an on-screen alert to let you know how much money you have available to withdraw.
  • Keeping track of your spending: You can sign up to receive text alerts when your account balance drops below a certain amount, which will be helpful for students getting to grips with budgeting
  • In-credit interest? With effect from 1 August 2017 credit interest will no longer be available on the Student Bank Account.
  • Student credit card: If you're 18 or over, you can apply for a Student Credit Card with a credit limit of up to £500. Handy for emergencies, but not necessarily wise if you know you will spend without being able to pay it back.

NEW: HSBC have just announced that their student bank account, along with all it's perks, will be available to those taking Higher Level Apprenticeships (level 4+).

HSBC UK is the first high street bank to extend availability of its student account so those working towards a higher level apprenticeship can enjoy the same benefits as those studying a full time degree at a university or college.

Find out more here.

Contact: 0345 740 4404

Halifax

  • Overdraft amount (interest free): ‘Up to’ £1,500
  • How long can you have the overdraft for? You can get an interest free overdraft for the length of your course, and up to a year after you graduate (subject to status).
  • What’s the freebie? No freebie
  • Is it guaranteed or ‘up to’? ‘Up to’
  • Credit check? Yes
  • Keeping track of spending: Free mobile text alerts for balances, limit and recent transaction history
  • How much is it if you go over your overdraft? £1 daily fee with a £12 monthly fee
  • In-credit interest? Credit interest on any credit balance 0.10% AER (0.10% gross) variable

Offer a very helpful glossary of Bank Terms, which can help you navigate some of the more complicated bank jargon!

Find out more here.

Contact: 0345 720 3040

RBS

  • Overdraft amount (interest free): You can apply for a limit of up to £500 in your first term and then up to £2000 after that.
  • What’s the freebie? A four year National Express coach card, giving ⅓ of coach travel.
  • Is it guaranteed or ‘up to’? ‘Up to’
  • Credit check? Yes
  • How much is it if you go over your overdraft? £6 for each payment that goes over your overdraft (max £60 per period).
  • In-credit interest? None

Find out more here.

Contact: 03457 24 24 24

Natwest (Part of RBS)

  • Overdraft amount (interest free): You can apply for a limit of up to £500 in your first term and then up to £2000 after that.
  • What’s the freebie? A four year National Express coach card, giving ⅓ of coach travel
  • Is it guaranteed or ‘up to’? ‘Up to’
  • Credit check? Yes
  • How much is it if you go over your overdraft? £6 for each payment over your overdraft (max £60 per period).
  • In-credit interest? None

Find out more here.

Contact: 0345 788 8444

Barclays

  • Overdraft amount (interest free): You can apply for a limit of up to £500 in your first term and then up to £3000 after that.
  • What’s the freebie? You can get cashback from Apple, Amazon and many other top retailers
  • Is it guaranteed or ‘up to’? ‘Up to’
  • Credit check? Yes
  • How much is it if you go over your overdraft? There is no unauthorised borrowing available so no charges or fees for going into an unauthorised limit, unless a transaction is returned unpaid due to insufficient funds (fee of £8 for each returned transaction, max.1 per day).
  • In-credit interest? None

Find out more here.

Contact: 0800 400100

Lloyds

  • Overdraft amount (interest free): You can apply for an interest and fee-free overdraft of up to £1,500 (£500 for the first 6 months from account opening, £1,000 7 months from account opening, £1,500 from 10 months since account opening)
  • What’s the freebie? No freebie
  • Is it guaranteed or ‘up to’? ‘Up to’
  • Credit check? Yes
  • How much is it if you go over your overdraft? 8.21% AER and £6 a month. (To put this into perspective: If you use a planned overdraft of £1,800 in your second year, the overdraft interest rate they charge on the first £1,500 will be 0% EAR variable. The overdraft interest rate on the next £300 will be 8.21% EAR variable and a Monthly Overdraft Usage Fee of £6 will apply).
  • In-credit interest? None

Find out more here.

Contact: 0345 300 0000

TSB

  • Overdraft amount (interest free): Up to £1,500
  • What’s the freebie? No freebie
  • Is it guaranteed or ‘up to’? ‘Up to’
  • Credit check? Yes
  • How much is it if you go over your overdraft? If you go over by £10 or less, you won't be charged fees or interest. But if you exceed the limit by more than £10 over any interest and fee-free amount, you will be charged 0.66% per month and 8.21% EAR.
  • In-credit interest? None

Find out more here.

Contact: 020 3284 1575

Nationwide

This seems like one of the best student bank accounts going

  • Overdraft amount (interest free): Start you off with £1000 in your first year and then up to £3000
  • What’s the freebie? No freebie
  • Is it guaranteed or ‘up to’? ‘Up to’
  • Credit check? Yes
  • How much is it if you go over your overdraft limit? The account is designed to prevent you from going over your agreed overdraft limit. However, if you do go over your agreed limit, they won’t charge you. You’ll simply need to bring the balance back within your agreed limit before you can carry on using your account.
  • In-credit interest? Receive 1% AER/gross p.a. (variable) on balances up to £1,000.

Find out more here.

Contact: 0800 302011

The Coop Bank

  • The Cooperative no longer offer a student bank account, so this will not be an option for students beginning in September 2017 onwards.

Helpful budgeting tip

As well as bank accounts, there are some useful budgeting options out there:

Monzo

  • Monzo do not have a student bank account, but it might be a good debit card to apply for if you are new to budgeting
  • Monzo is a contactless debit card that you can top up wherever from an app on your phone
  • The app helps you to budget and track your spending in categories, such as eating and drinking, leisure and travel.
  • To sign up, just download the Monzo app on your phone. You will have to put a signup amount of £100 on to start with.

Want to skip the queue and join Monzo now? Join here.

student account apps

Loot Bank

  • Loot Bank is another helpful alternative budgeting option
  • Loot acts like a bank, and therefore with Loot you can set up an account via the app, and receive a prepaid card with a sort code and account number
  • Loot then categorises your spending, meaning that you can create a weekly budget split into key areas, such as groceries, eating out, travel and entertainment
  • With Loot, you can receive instant transaction notifications every time you make a purchase
  • The app allows you to create a weekly budget
  • You can spend abroad without any additional fees using the wholesale MasterCard®
    exchange rate
  • You can separate money and work towards something special with visual #LootGoals
  • Instantly pause and un-pause card if lost or stolen
  • Choose from over 100 currencies to deposit money into any Loot account
  • Add money to your Loot card via Android Pay or another debit card

Find out more here.

FAQS

When can I open my student bank account?

You can only apply once you can prove that you’ll be going to/ starting university in September. So you can only apply once you’ve got your UCAS confirmation letter with an unconditional offer, or, proof that your A-Level results have met a conditional offer.

What is a ‘planned’ / ‘agreed’ overdraft?

A planned/agreed overdraft is the size of overdraft you agree with your bank. E.g. most accounts in the first year will agree on a planned overdraft of something between £500 and £1000.

What do I do when I finish university?

Most banks offer a ‘graduate account’ that follows on from your student account. We suggest discussing these with the bank you choose for your student account, and reassessing the options in your final year of university.

With some banks, your student account will automatically change after a couple of months into a regular account, with a normal overdraft. Make sure to be aware if this is the case, because then you will have to pay your overdraft back with interest. So it is sensible not to be in your overdraft as you near completing university.

How many student bank accounts can I open?

This is a hard question, and there’s not necessarily a ‘right’ answer. Opening up multiple accounts is a complicated affair, especially multiple student accounts. Some banks won’t mind you opening a student account with a different bank, but others will say in their terms and conditions that you cannot do this.

As most student bank accounts require you to put in a minimum of around £500 per term to your account, it’s probable that you won’t need more than one.

Equally, trying to monitor multiple accounts can get overly complicated, and can look bad in the future when you may want to apply for further credit, or loans such as a mortgage.

We suggest going into a local branch of your chosen student bank account, and discussing with them whether you should or need to open another account, but overall it’s probably not worth trying to open two.

Should I get another bank account alongside my student account?

It might be worth opening another non-student account for other savings or for your parents/ carers to put money into that you can access whenever you might need. This can be a good backup if you lose your card, or an account that you put savings into.

Do I need to use my overdraft?

NO! It is more there for emergencies, and if you don’t need to use it, then don’t.

What happens to my student account if I drop out?

The first thing you need to do is tell your bank that you are no longer a student. Go into a local branch or phone your bank as soon as possible and explain your situation. You will hopefully be able to negotiate a repayment plan to pay back your overdraft either without interest or with a low interest rate.

If you fail to tell your bank your overdraft may be withdrawn at any time and you will have to pay back with often high interest rates that can get you into more debt.

We hope this guide has covered everything you need when looking for a student account! Remember if you ever have any queries, it’s best to go direct to your bank. Finally, always remember that overdrafts are loans, not free money, and you will have to pay them back!

Last updated 10 Aug 2017

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