Big banks love enticing new students with offers of glitzy freebies and 0% overdrafts, then rely upon their profitable custom for decades after graduation.
Yet act smart, and students - both this year's freshers and seasoned academics - can switch to the best and gain £100s.
In This Guide
Best Buys: Student Accounts
What is a student account?
Put simply, it's a day-to-day current account specifically for students in higher education, with advantageous rates and functions. The only question is, What Counts As A Student?. This varies from bank to bank.
When to open an account?
As soon as possible! It used to be necessary to wait until you were settled into student digs, knee-deep in Pot Noodles, but now most banks accept anyone with a UCAS offer letter (conditional or unconditional). So, you can open an account before the start of term and bag an extra month or so's worth of preferential terms.
Beware, Freshers' Fairs!
Students' Unions, normally fierce protectors of students' rights, sometimes sell exclusive access to their new students' fairs to the highest bidding bank to bolster the Union's funds. As a former Students' Union President, I remember the negotiations myself!
Sadly, it's far from certain that the one on offer will be the top account on the market; generally it'll be the one who pays the uni the most money.
Picking the top student account
Almost every bank offers online access and free cash machine withdrawals, so which branch is nearest has little relevance for most able-bodied students. Therefore, to compare, you should purely examine what's on offer.
Go for the biggest overdraft!
Banks try to bribe students with freebies to entice you to open an account with them; but these sweeteners should only be a secondary consideration. For more...
Go for the bank that'll give you the biggest and longest 0% overdraft
Many students need an overdraft, so it's important it's free. Never go beyond your 0% overdraft or it's hugely costly. If desperate, get the bank's permission to extend your limit or you'll get nightmare bank charges.
The solution is to go for the lowest interest rate available, as the lower the rate is, the less the debt costs you (read a full Interest Rates Beginners' Guide).
The big draw of student accounts is that they let you borrow interest free, PROVIDED you stay within the limits. This is as good as it gets; a much bigger gift than any freebie. Therefore the question that pays is, 'which bank gives the most 0% borrowing, for the longest period?' (find out in the Best Buys).
Before you grab one though, there are a couple of stark warnings about overdrafts...
-
Don't go over 0% overdraft limit
Banks can agree to give you bigger overdraft limits, however if you use it the interest skyrockets to rates similar to those on credit cards, so always avoid if you can.
-
Watch out for bank charges
If you go over your agreed overdraft limit you'll be hit with huge bank charges of up to £35 a time, a few of these could completely wipe out your budget for the term. If you're having trouble always talk to the bank first; getting it wrong can leave you with credit rating problems lasting years.
NEVER borrow more than you need
Just because you're not paying interest doesn't mean you won't need to repay the debt - you will! Never borrow unnecessarily; remember once you graduate you'll pay for these debts, so budget as best as you can and never spend more than is absolutely necessary.
Borrowing is dangerous; please educate yourself about how it works before doing it in any form. There's more info in the Student Finance and Interest Rates guides.
-
How to budget
Never count your 0% overdraft limit as part of your income. No-one ever tells you how to calculate your income when you're a student, so add up student loan + grants + employment earnings + money from family. Then make sure you don't spend more than that figure.
-
Some overdraft rates are 'up to' not guaranteed
The big high street banks shout about their large 0% overdraft offers, but unfortunately when you dig deeper some state that the rates you get are 'up to' the maximum limit.
-
You will be credit scored
When you apply for any debt product, including a bank account with an overdraft, the lender will credit score you. This is to decide how desirable a customer you are based on behavioural predictions from all your prior financial data.
Yet as a student, it's likely there will be very limited data on you, which makes credit scoring very difficult. Sadly this can leave some students rejected due to ridiculous anomalies, and there may be no rhyme, reason or solution to this. For more info read the Credit Scoring guide.
Should I ignore the freebies?
The value of gimmicks, freebies and even cash bribes often pale compared to huge interest-free overdrafts, but when a number of different accounts offer similar overdraft levels, then freebies are great deal-breakers.
Always remember why freebies are offered though.
Banks know most customers never switch, so they hope a £50 freebie buys your business for life
It's for this reason that while the big high street banks are usually the least competitive providers, in the student market they're all fighting it out with super hot products. They know that if they get you now, they can make serious bucks out of you for a long, long time.
However, savvy students can take advantage. Choose the right student account and max out your gain from it, but don't let their short term bribe and free overdraft buy you for life. Grab what's on offer, then after uni, ditch and switch to the Top Graduate Account and eventually the Top Bank Account.
Freebie grabbing often prompts the question, 'can I open more than one student account?'. It used to be fine, but banks' criteria are now tighter, usually requiring you to deposit your student loan or main income in there. So, multiple-freebie grabbing is now much more difficult.
What about students who don't need to borrow?
That rare student breed - those likely to be in credit - could PROFIT (provided they're financially disciplined) by opting for the account with the biggest 0% overdraft, then using a budgeting technique we call 'deficit banking'.
The premise is to keep as big a negative balance within your 0% limit as possible, then put this money into the top paying Instant Access Savings Account (and interest earned will be tax-free for most students). When your overdraft limit drops, move the necessary cash back to your current account (use the Tart Alert to remind you).
This means interest is earned on money the bank lends you for free, done right, this can add around £200 to a student's coffers over the length of a course, and similar tricks are possible with student loans (see the Student Funding article).
However, this isn't an excuse for spending or borrowing more. If you're not financially disciplined, DON'T TRY IT.
Top Student Accounts 2010-11
For years, this has been a red hot head-to-head battle between the high street banks; yet they often compete by publishing bigger overdraft limits, then sneakily not allowing all students to have them. This means comparing overdraft sizes is only half the battle.
The Co-operative bank
Highest guaranteed limitsThe highest guaranteed overdraft limit comes from The Co-operative bank which will give you £1,400 0% overdraft if you are accepted. In the second year of study you'll be able to get £1,700 and £2,000 in the third (as long as your account activity is deamed satisfactory). In order to get the overdraft you must deposit £300 when you open the account (this can come from your student loan).
With this account if you need to borrow over your limit any agreed lending is at a very reasonable 9.9% APR, however if it isn't agreed this rate jumps to 15.9% plus big charges on top, so always avoid.
The Co-op account doesn't have an official graduate account, but you can keep the student account and its 0% overdraft for a year after graduation. However it's likely there'll be other graduate accounts offering more so consider switching.
If you apply for this, please let us know about your experiences and if there are problems getting the full overdraft limit: Co-op Feedback.
Quick Stats. 0% Overdraft: Year1: £1,400 Year 2: £1,700 Year 3: £2,000 Authorised O/d rate: 9.9% EAR. Unauthorised O/d rate: 15.9% EAR (Plus other charges). In-credit interest: 0.1% AERHighest 'up to' overdraft limits
0% overdraft up to £3,000, though likely you'll get lessSome big high street banks have used big 0% overdraft figures to lure customers in, but importantly these are 'up to' limits, so you aren't guaranteed to get them.
Those that want to take the chance of a higher limit in the future could try one of these, but feedback from last year shows very few people got even close to the the limit.
The highest advertised rate comes from Halifax and Bank of Scotland, it shouts loudly about a whopping maximum interest-free overdraft of up to £3,000, however if accepted you will initially get just £500, you must then request further increases and the feedback tells us it's often only up to £1,000 by the end of year one. Though by the time you've completed your course you should be getting closer to the full amount.
If you apply for this, please let us know the size of the overdraft you get: Halifax Feedback.
Quick Stats. 0% Overdraft: All years: £500 initially, Up to £3,000 (not guaranteed) Authorised O/d rate: 7.2% EAR. Unauthorised O/d rate: 24.2% (plus other charges). In-credit interest: 0.1% AERNatwest / Royal Bank of Scotland.
Best freebie £65 railcard.If you're after the best freebie, the outright winners are Natwest* and RBS where you can get a free 16-25 Railcard railcard, which cuts many UK rail fares by a third. The offer varies depending on where you are studying...
Studying/living in England or Wales?
For students studying or living in England or Wales the Natwest account gives a railcard while you are a student (for up to five years), although it will only renew it if you use the account frequently (min. one credit every three months and three debits per month during term time).
Studying/living in Scotland?
If you're studying or living in Scotland the RBS account gives a three year railcard. RBS will only renew the railcard if you use the account frequently (min. one credit every three months and three debits per month during term time).
The overdraft limits here aren't as high as Co-op plus they're not guaranteed, so you may not get the full amount. In the first year the limits are tiered, starting with £500 in term one, £750 in term two and £1,000 in the third term. In year 2 the limit is up to £1,250 and up to £1,500 for year 3.
If you apply for this, please let us know the size of the overdraft you get: Natwest Feedback or RBS Feedback.
Quick Stats. 0% Overdraft: Year 1: Tiered up to £1,000 Year 2: Up to £1,250 Year 3: Up to £1,500 Authorised O/d rate: 17.81%. Unauthorised O/d rate: 17.81% EAR (Plus other charges). In-credit interest: Natwest: 0.1% AER RBS: 0% from 22 SeptHigh street Student account details
Nine high-street banks offer student accounts, each with varying overdraft limits, incentives and term & conditions.
Santander 
barclays
Co-operative
Account Name
Student Current Account |
Student Additions |
Student Account |
Eligibility criteria (plus min age 18)
Must have a confirmed place at a Higher Education Institution and going to study for a degree or HND course |
In full-time higher education in the UK, studying for a degree/degree-equivalent or post-graduate course. Pay your main source of funding into your the account. Permanent UK resident. |
You must be a UK citizen or resident or,
if you are a foreign national, you must have been a UK resident for a
minimum of 3 years. Must be over 17 yrs and 6 mnths &
in full-time education, an under or post graduate student, including
mature students and existing students & you must make an initial
deposit into your account over £300. |
Sign up/other incentives
Comes with free insurance for a customers laptop, mobile phone and gadgets. The cover lasts for 3 years. To qualify the customer must pay in at least £500 each term. |
Offers on Laptops, Mobile Phones and Mobile Broadband, through Phones 4u |
N/A |
Maximum interest free overdraft limits
Year 1 |
||
£1,000 |
Initially £200 will be given, then requests for more can be made. |
£1,400 |
Year 2 |
||
£1,250 |
Up to £2,000 |
£1,700 |
Year 3 |
||
£1,500 |
Up to £2,000 |
£2,000 |
Year 4 | ||
£1,800 | Up to £2,000 | £2,000 |
Year 5 | ||
£2,000 | Up to £2,000 | N/A |
Interest free Average
3 Year Course |
||
£1,250 |
Up to £2,000 |
£1,700 |
5 Year Course |
||
£1,510 |
Up to £2,000 |
£1,420 |
Interest free limits guaranteed or case by case?
Guaranteed providing the customer credits £500 within one month of account opening
|
Subject to application and status
|
Guaranteed
|
Agreed Overdrafts beyond the 0% limit
9.9%
|
8.9% above the interest free limit, up to a max of £3,000 |
9.9%
|
Unauthorised overdraft rate & fees
28.7% Instant overdraft fees:
£0 to £9.99 will cost £5 £10 to £19.99 will cost £15 £20 to £29.99 will cost £25 Over £30 will cost £35 Overdraft fee also applies - £25 each month the service is used |
If you go past your overdraft, you'll be charged a 'Personal Reserve' fee of £22 every five working days, until crediting the account to clear the reserve. You'll be advised of your personal reserve limit once an application is successful. Any payments debited from the personal reserve will be honoured. Payments beyond the personal reserve will be bounced, unless they fall into the category of a guaranteed transaction (e.g. a cheque payment guaranteed with a cheque card). Customers will pay £8 per item for a returned or guaranteed transaction, capped at five per day. |
15.9%, unpaid items £30
|
In-credit interest rate?
2% AER on balances up to £500 – no interest paid on balances above £500 |
0%
|
0%
|
Transfer from other banks and get this year's deal?
Yes but the student must switch their existing student account to Santander using the Account Transfer Service. They will then get the relevant overdraft tier and the free insurance |
Yes
|
Yes, the overdraft will be in line with year of course |
Do T&Cs outlaw opening a student account with another bank?
No but they can’t have more than one Santander Current Account
|
No
|
Yes
|
Anything else?
N/A
|
N/A
|
N/A
|
halifax/Bos 
hsbc 
lloyds tsb
Account Name
Student Current Account |
Student Bank Account |
Student Account |
Eligibility criteria (plus min age 18)
|
Either a student in full-time higher education (that’s a degree course or similar higher education course) or stopped being a student in full-time education in the last 12 months. Letter of Confirmation from university required
|
Have been a resident in the UK, Channel Islands or Isle of Man for three years. Not hold any student bank accounts elsewhere. Be studying or intend to study a qualifying full-time undergraduate course of two years or more at a UK, Channel Islands or Isle of Man university/college or a part-time course with a Disability Student Allowance. Be studying or intend to study a course that qualifies for the Student Bank Account.
You'll need written proof of this, e.g. a letter from the college or university. |
You need a UCAS confirmation letter or a letter from your university or college confirming your place.
Have been a permanent UK resident for the last 3 years,
not have a Student Account elsewhere,
• be studying on a full-time course of at least two years, or a one year access course leading onto a full-time degree. |
Sign up/other incentives
25% discount on AA breakdown cover. 20% discount on our Card Care card protection insurance |
Two years Worldwide Travel Insurance with winter sports cover. Customers need to deposit £250 in one lump sum into their account between 1 August and 31 October 2010. Free TalkMobile SIM card with £5 preloaded credit and free calls to HSBC telephone banking so you can manage your money on the go. |
NUS Extra Card for three years YHA membership for three years. 40 free music downloads from eMusic plus a free LAVA Mini Speaker. |
Minimum interest free overdraft limits
Year 1 |
||
£500 given initially then increases can be requested |
Up to £1,000 |
£1,500 tiered in the first year: £500 for the first 6 months £1,000 in months 7 to 9 £1,500 after that |
Year 2 |
||
Up to £3,000 |
Up to £1,250 |
Up to £1,500 |
Year 3 |
||
Up to £3,000 |
Up to £1,500 |
Up to £1,500 |
Year 4 |
||
Up to £3,000 |
Up to £1,750 |
Up to £2,000 |
Year 5 |
||
Up to £3,000 |
Up to £2,000 |
Up to £2,000 |
Interest Free Average
3 year course |
||
Up to £3,000 |
Up to £1,250 |
£1,500 |
5 year course |
||
Up to £3,000 |
Up to £1,500 |
£1,750 |
Interest free limits guaranteed or case by case?
Case by case basis. £500 overdraft will be offered upon account opening. Further increments will need to be applied for. Credits of £400 per quarter will be required to consider extension of overdraft. Overdraft limit will be increased over time and based upon account conduct. |
All overdraft requests are subject to status and assessed on an individual basis. |
They are guaranteed. |
Agreed Overdrafts beyond the 0% limit
7.2%
|
Additional borrowing over the interest-free limit at three per cent above HSBC base rate
|
8.2%
|
Unauthorised overdraft rate & fees
24.2% £28 fee per month Paid item fee: £20 Unpaid item fee: £20 |
Additional borrowing over the interest-free limit at three per cent above HSBC base rate Returned items (inc. cheques, direct debit, standing orders): Up to £10 = no charge Up to £25 = £10 per item £25 plus = £25 per item. |
8.2%
Monthly fee: £15 Daily fees: less than £25: £6 a day £25 to £100: £15 a day more than £100: £20 a day Max 10 daily fees in a month £20 returned item fee (max. 3 per day) |
What is the in-credit interest?
0.1%
|
2% on balances up to £1,000 (in 1st year only). 0% on all other balances
|
0.1%
|
Transfer from other banks and get this year's deal?
Yes. Overdraft will be based on personal circumstances |
Yes, the student will be put on the appropriate year e.g. second year student will be entitled to an interest free overdraft entitlement of up to £1,250. The request for an overdraft is subject to status and will be assessed on an individual basis.
|
Yes. This will be based on the year of their study
|
Do T&Cs outlaw opening a student account with another bank?
Student accounts are not able to switch to us.
For new account applications we would recommend that where a student account is already held, the customer should return to the original provider for further assistance – this is in line with our views on responsible lending |
No
|
Yes
|
Anything else?
N/A |
25% off Lonely Planet Travel Guides |
N/A
|
natwest
rbs
smile
Account Name
Student Account |
Student Royalties |
Student Account |
Eligibility Criteria (plus min age 18)
1st year undergraduate Student Accounts are available only to permanent UK resident students who are completing: (a) a full-time undergraduate higher education course of at least two years’ duration; or (b) a full-time postgraduate course, at a university or college of higher education in the UK. A permanent UK resident is someone who has been ordinarily resident in the UK for three years or more. Customers can open after 19 August with an unconditional letter of acceptance as proof of student status |
1st year undergraduate Student Royalties Accounts are available only to permanent UK resident students who are: (a) a full-time undergraduate higher education course of at least two years’ duration; or (b) a full-time postgraduate course, at a university or college of higher education in the UK. A permanent UK resident is someone who has been ordinarily resident in the UK for 3 years or more. Customers can open after 5 August with an unconditional letter of acceptance as proof of student status |
A UK citizen or resident or if you are a foreign national you must have been a resident for a minimum of 3 years. |
Sign up/other incentives
Free 5 year young person’s railcard (worth £130). To qualify customer’s account must be fully open by 2 October and must register for online banking and online statements. The card is renewed on an annual basis providing the customer continues to use the account Free student discount card £100 off ASUS laptop |
For customers in Scotland Free Travel Package. Made up of a free 3 Year 16-25 Railcard and 4 weeks’ free bus travel (in Edinburgh, Glasgow or Aberdeen). To qualify customer’s account must be fully open by 2 October, they must register for online banking and online statements. The Railcard is renewed annually providing you continue to use the account Free student discount card £100 off ASUS laptop English & Welsh customers: Free student discount card £100 off ASUS laptop |
N/A |
Minimum interest free overdraft limits
Year 1 |
||
Up to £1000, tiered by term; £500 limit in first term, £750 limit in second term, £1000 limit in third term |
Up to £1000, tiered by term; £500 limit in first term, £750 limit in second term, £1000 limit in third term |
£1,000 |
Year 2 |
||
Up to £1250 |
Up to £1250 |
£1,400 |
Year 3 |
||
Up to £1500 |
Up to £1500 |
£1,800 |
Year 4 |
||
Up to £1750 |
Up to £1750 |
£2,000 |
Year 5 |
||
Up to £2,000 |
Up to £2000 |
N/A |
interest free average
3 Year Course |
||
Up to £1,250 |
Up to £1,250 |
£1,400 |
5 Year Course |
||
Up to £1,500 |
Up to £1,500 |
£1,550 |
Interest free limits guaranteed or case by case?
Overdraft subject to eligibility criteria. However the limits are intended to be representative of what a customer is likely to get.
To keep interest free overdraft the customer must use the account as their main account this means making at least 3 debits must be made each month and at least 1 credit every 3 months |
Overdraft subject to eligibility criteria. However the limits are intended to be representative of what a customer is likely to get.
To keep interest free overdraft the customer must use the account as their main account this means making at least 3 debits must be made each month and at least 1 credit every 3 months |
Guaranteed
|
Agreed Overdrafts beyond the 0% limit
17.81%
|
17.81%
|
9.9%
|
Unauthorised overdraft rate & fees
17.81%
Unpaid fee £5 |
17.81% £10 Maintenance charge
£15 Paid Referral Fee £15 Guaranteed Card Payment Fee Unpaid fee £5 |
15.9%
Unpaid items £30 |
In-credit interest rate?
0.1%
|
0% from 22 Sept
|
0.12%
|
Transfer from other banks and get this year's deal?
Yes, but they won't be eligible for the free incentives (unless in 1st year). Overdraft limit is based on year of course |
Yes, but they won't be eligible for the free incentives (unless in 1st year). Overdraft limit is based on year of course
|
Yes, the overdraft will be in line with year of course |
Do T&Cs outlaw opening a student account with another bank?
No, but must use the account as 'your main bank account'. Action may be taken if a customer is clearly in breach of this main account criteria. In order to remain eligible for the 0% overdraft, customers must use us as their main account (this means a minimum of 3 debits a month and 1 credit every 3 months) if you do not do this then they reserve the right to remove 0% rate. 5 Year Railcard is only renewed if there is evidence of the account being used. |
No, but must use the account as 'your main bank account'. Action may be taken if a customer is clearly in breach of this main account criteria. In order to remain eligible for the 0% overdraft, customers must use us as their main account (this means a minimum of 3 debits a month and 1 credit every 3 months) if you do not do this then they reserve the right to remove 0% rate. 5 Year Railcard is only renewed if there is evidence of the account being used. |
Yes
|
anything else?
N/A
|
N/A
|
N/A
|
It's also worth remembering that next year even better accounts are possible so it's worth checking whether you should switch. All next year's top deals will be in the free weekly email.
While these 0% overdrafts are very useful, and should help you with cash-flow issues while you're a student, don't ever think of this money as part of your income, and there's a simple reason for this.
A year or so after you graduate, your 0% overdraft jumps to expensive high street rates
So, once this happens, it's crucial you switch away from your student account. Most big banks also offer Graduate Accounts, which give 0% overdrafts of decreasing sizes for a few years following graduation, and switching is simple.
Existing students should switch too!
Some of the current 0% overdraft deals are better than others, thus if you're a current student going into your second or third year, you may want to take advantage (though do confirm it'll at least match your current limit initially).
Existing students can usually transfer their accounts over and get the same terms as others in their year of study, although unfortunatley those switching won't be eligible for RBS's travel package incentives.
It's worth going in and having a chat. Even existing student account holders who don't have the maximum limits can try applying to increase their overdraft amount if they haven't already, provided they go into a branch with proof of intended funding (i.e. student loan documents).
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