Railcards, 0% overdrafts and discount cards; banks love reeling new students in with goodies, and they're getting competitive. This is a guide to bagging the best deal, whether you're a fresher or just refreshing finances.
The accounts in this guide are 2015/16 accounts, and are open to any students currently studying - so, if you've already got an account, why not see if you can switch to a better deal?
Best Buy Student Accounts
Get the biggest 0% overdraft - unless huge freebies beat it
Student accounts are simply bank accounts made for those in higher education. They let you pay money in and out, and offer additional benefits such as an interest-free overdraft and a debit card.
Most students need an overdraft, where the bank lets you spend more than you've got (at no extra cost) to a set amount. Aim to get the biggest and longest guaranteed 0% overdraft - the only time this doesn't apply is if the freebie on offer is so valuable to you it outweighs this.
Be wary of banks offering bigger overdrafts than our top picks - some give 'guaranteed' amounts, others 'up to' amounts - so make sure you're comparing like for like. However, you must ask for extensions each year, even on guaranteed limits - they're not applied automatically.
When can I open a student bank account?
Usually, to be accepted you'll need a UCAS confirmation letter with an unconditional offer, or, if your offer's conditional, you'll need to have A-Level results that meet that condition.
As soon as you've got these, you can open an account, allowing you extra time to make full use of its benefits before the start of term. But beware, some banks may want a letter or other acknowledgement from the university you'll be attending confirming your place.
If in doubt, call the bank you want an account with and ask what its criteria are.
Do you have the right ID to open an account?
As with all bank accounts, you'll need proof of address and identity. This can include: passport, birth certificate, current UK photocard driving licence or full UK paper licence.
I'm an existing student. Can I switch to a different bank account?
Existing students can switch their account to get the same terms as others in the same year of study. If you're a second or third year student, be sure to check the new account at least matches what you're already being offered (or have) in terms of a 0% overdraft.
For more details, see the top accounts below.
Never go over your overdraft limit
This isn't a rule just for students, it's a rule for life. The game totally changes if you go beyond your overdraft limit - charges shoot up and you can be caught in a vicious cycle that's tough to ever escape from. If you stay within your limit there's usually NO COST.
If you're struggling, at least talk to the bank. Try to agree an extension but remember, you are likely to be charged interest, up to a huge 24% EAR. It's always far better to plan and budget to avoid this.
If not, or if you go over without permission, the charges can be enormous - up to £25 per transaction (so a shopping trip spending £30 in five debit card transactions could see you facing £125 of charges) - beware! More info in Bank Charges Compared.
What is an overdraft?
An overdraft facility allows you to spend more money than you have in your account, up to a certain limit. Student accounts provide a set level of overdraft interest-free for the duration of your course.
Remember the bank is just lending you this money. It'll need to be paid back, so don't get too comfortable. Always keep in your mind that's it's not actually yours, it's the bank's.
Beware, you'll be credit scored
When you apply for debt products, including a bank account with an overdraft, the bank will credit score you to decide how desirable a customer you are based on behavioural predictions from your previous financial data.
As a student, it's likely there'll be very little 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. Read the Credit Scoring guide for more info.
DON'T pick based on the closest branch or ATM
Just because there's a particular bank on campus, or a conveniently-located cash machine nearby, it DOESN'T mean you should choose an account with it.
You can withdraw cash free of charge from any bank's ATM and almost every bank gives online access. Branch location has little relevance for able-bodied students. To compare, examine what's on offer and go for the best deal.
After uni, switch to a top graduate account
Your aim straight after uni should be to pay down your 0% overdraft. If that's not possible, for at least a year after finishing your course, you're still eligible for preferential terms, including 0% interest overdrafts, allowing you to gradually pay off the debt.
Best buys: top student accounts
The high street banks compete in a red-hot battle. They publish ever bigger overdraft limits, but then sneakily won't allow all students to have them. The key is whether the overdraft is 'guaranteed' or 'up to' - the latter means you'll only get it if you have a good credit record, and all accounts require you to pass a credit check.
Free 4-yr railcard & decent 0% overdraft
Santander* gives accepted new 123 Student Current Account holders who pay in £500/term a four-year 16-25 Railcard. This is also available to full-time students aged 26 and over. Worth about £90 (we valued it against a three-year railcard which normally costs £70 as four-year cards aren't available for general purchase), it gives a third off most rail journeys.
You'll also get an 'up to £1,500' 0% overdraft for three years, though this amount is judged on a case-by-case basis, and up to £2,000 if your course stretches to five years. You could switch to another account with a bigger overdraft after your first year and keep the railcard, as you get it within three weeks of account opening.
Please let us know your experiences and any problems: Santander feedback, but in general we haven't heard many complaints.
- You automatically get a £250 overdraft when you open the account, then up to £1,500 in year one to three if you make the £500/term pay-in.
- It goes up to £1,800 in year four and £2,000 in year five, if your course is that long.
- The overdraft limits aren't guaranteed but most accounts usually get close to them.
- Santander shares its £85,000 UK savings safety guarantee with Cahoot, so don't hold more than £85,000 across the two banks.
- In-credit interest: 1% for £100+, 2% for £200+, 3% between £300 and £2,000
- Arranged overdraft cost: No fees
- Unarranged overdraft fees: £5 daily charge (max 10/month), paid/unpaid fees: £5/£10 per item
- 0% ' overdraft: Years 1-3: Up to £1,500. Year 4: Up to £1,800. Year 5: Up to £2,000.
How do I get the railcard? To get the railcard, you'll need to open a Santander 123 Student Account for the first time and make the £500/term pay-in. You must register for online banking, which will take 7-10 days to set up, then enter a special code for the railcard website, which is valid for 60 days ONLY. Make sure you enter the code within the time-frame, as they won't issue you another code.
Can I get the railcard if I'm in Northern Ireland? Unfortunately the railcard isn't valid in Northern Ireland, although the overdraft still makes it a decent option.
What should I avoid with this account? Go into an unauthorised overdraft, and the fees are huge, so avoid at all costs. Arranged overdrafts aren't permitted above the set limits.
How can I give feedback on this account? Please let us know your experiences and any problems: Santander feedback.
Big year one 0% overdraft with good chance of getting the max
The Co-operative Bank has got strong - but not the overall biggest - 0% overdraft limits of £1,400 in year one, £1,700 in year two and £2,000 in year three, plus it consistently scores well in our customer service polls. Unlike the banks below which shout about huge £3,000 limits, Co-op's told us 90% of successful applicants will get the full amounts advertised.
- If you pay in your student loans, and don't incur charges, plus you must ask for the increases at the beginning of each year.
- Please tell us if you get the full 0%.
- In-credit interest: None
- Arranged overdraft cost above 0% limit: 9.9% EAR
- Unarranged overdraft fees: 18.9% EAR plus £15 unpaid item fee (max £150 per quarter)
- 0% overdraft: Year 1: £1,400 Year 2: £1,700 Year 3: £2,000
I've heard a lot about Co-op Bank - lots of scandals. Is it unstable? We have to highlight recent scandals, solvency worries and the fact it's now 70% privately-owned.
You need to decide where you stand on the self-proclaimed ethics of the bank, but the key fact on solvency is the first £85,000 of savings per person in the combined group (Co-op Bank, Smile, Britannia) is guaranteed by the Government-backed FSCS. This includes money in your student account (if you're lucky enough to have some). For how this works, see the full Savings Safety guide.
What does it cost to go over overdraft limits? Any agreed borrowing over the limit costs an OK 9.9% APR. But it jumps to 18.9% plus big charges on top for unarranged borrowing, so don't do it.
Can I get a graduate account? The Co-op doesn't have an official graduate account. You can keep the student 0% overdraft for a year after graduation, but other graduate accounts are likely to beat it.
Joint highest 'listed' max 0% overdraft + free £60 Amazon voucher
The HSBC account gives a free £60 Amazon gift card when you open the account - a good alternative if you don't think you'll use the railcard Santander offers. It also shouts loudly about a maximum interest-free overdraft of up to £3,000, but feedback tells us it's often only up to £1,000 by the end of year one.
- If accepted, you'll initially get just £500. You must then ask for further increases, but you won't be guaranteed to get the full amount.
- As an added bonus, the account pays 2% interest on the first £1,000 credited, but only in your first year of study.
- We welcome your feedback, detailing if you were accepted and the overdraft limit you were offered.
- In-credit interest: 2% AER on balances up to £1,000 in the first year only
- Arranged overdraft cost: Can only borrow up to £3k
- Unarranged overdraft fees: No fees
- 0% overdraft: £500 initially, then up to £3,000 (not guaranteed)
Joint highest 'listed' max 0% overdraft
The Halifax student account gives overdraft limits of 'up to' £3,000, though only the first £1,000 is guaranteed - the rest is decided on a case-by-case basis. You can ask for increases from what you're given, but previous year's feedback was it's unlikely to go higher than the initial £1,000 in year one.
- Never, EVER go over the interest-free limit, or you'll be stung with huge rates up to 24.2% AER plus a monthly fee of £28, and returned item fees of up to £10.
- If you apply for this, please let us know the size of the overdraft you get in the forum's Halifax feedback thread.
- In-credit interest: 0.1% AER
- Arranged overdraft cost: 7.2% EAR
- Unarranged overdraft fees: 24.2% plus monthly fee of £28 and £10 returned item fee.
- 0% overdraft: All years: £1,000 initially, up to £3,000 (not guaranteed)
Tool: compare ALL student accounts
Do a budget the right way
It's a mantra parents push at their student offspring all the time. "You've got to do a budget young Johnny, it'll all go to hell if you don't, please do it Johnny, please..."
Yet "do a budget" is a meaningless phrase unless you understand your income.
With people who work it's an easy message:
You shouldn't spend more than you earn.¯
But when it comes to those going to university, you need to:
Add up student loan + grants + employment earnings + money from family, and that is your income. ¯
While 0% overdrafts are very useful and should help with cash-flow issues while you're a student, they're never part of your income. Always remember, an overdraft is a LOAN and must be repaid (its rate will jump once you graduate).
But if you're going to university next year or are currently studying, funding is key. Make sure you're aware of the loans and grants available to you and plan accordingly. See our Student Loans 2015/16 guide for more on fees and funding.
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