Student Bank Accounts
Grab the top overdrafts and freebies in 2020
Free 0% overdrafts and railcards – banks love reeling in new students with goodies, and the latest batch of accounts is out. This is a guide to bagging the best deal, whether you're a fresher or just refreshing your finances.
What is a student account?
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.
To be accepted you'll need a UCAS confirmation letter with an unconditional offer or, if your offer's conditional, A-Level results that meet that condition, or a letter from the university you'll be attending confirming your place. 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.
As with all bank accounts, you'll need proof of address and identity. This can include: passport, birth certificate or current UK driving licence.
Existing students can usually switch their account to get the same terms as others in the same year of study – though certain accounts restrict opening to first year students. If you're in your second or third year, or beyond, 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.
The student account need-to-knows
Most students need an overdraft, where the bank lets you spend more than you've got (at no extra cost) up to a set amount. Aim to get the biggest and longest 0% overdraft you can – 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.
It's also worth noting that many student bank accounts offer tiered overdraft amounts, which increase with each year of study, meaning you could end up with a bigger overdraft limit after your first year, so factor this into your decision-making process. However, you must ask for extensions each year, even on guaranteed limits – they're not applied automatically.
Also be wary of applying for the maximum overdraft possible just because you can. If you budget well you may not need it as anything other than a buffer, and the smaller your overdraft, the less likely you are to get caught in a dangerous spending spiral.
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.
You need to be 18 or over to get an overdraft – UK law doesn't allow banks to lend to anyone younger.
This particularly affects Scottish students, as you're more likely to finish Highers and start uni at 17. If this is the case, you CAN open a student account, but you'll need to wait until you're 18 to get an overdraft as part of it.
Not all banks will open a student account for 17-year-olds, but a few do allow it, including Bank of Scotland, Lloyds, NatWest, RBS and TSB.
This isn't a rule just for students, it's a rule for life. Going over your overdraft limit isn't as pricey as it used to be, as banks are no longer allowed to charge more for busting your limit.
However, you can still be charged for any payments that fail to go through, and it's easy to end up caught in a vicious cycle that's tough to escape from.
If you're struggling, at least talk to the bank. Try to agree an extension but remember, you are likely to be charged a high rate of interest. It's always far better to plan and budget to avoid this.
When you apply for debt products, including a bank account with an overdraft, the bank will credit-check 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 checking 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 Build Your Credit History and the main Credit Scoring guides for more info.
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, so examine what's on offer and go for the best deal.
Most banks that offer student accounts are part of the Current Account Switch Service (CASS), so you can easily switch your existing bank account – or another student account – as part of the normal process. Just open a new account, then use the new bank's switching service and it'll close your old account and move your money, direct debits, standing orders etc across.
However, many student accounts will only let you open them if you're a new student – as is the case with the Nationwide account below – so check first if switching from another student 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.
Switch to the Top Graduate Account to continue getting the benefits. Many of these accounts operate by reducing your 0% overdraft limit each year, allowing you to gradually pay it off before the interest-free period ends.
Top student accounts 2020/2021
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 former means you'll get it if you've been accepted for the account (and asked for the max limit), but the latter means you'll only get it if you have a good credit record.
We've focused our top picks on the accounts that have guaranteed overdrafts, but the table below has more information about other accounts if neither of these suit.
The Nationwide FlexStudent account offers accepted new students a £1,000 0% overdraft in year one, £2,000 in year two and £3,000 in year three. You'll definitely get these limits if you ask for them – as long as you pay in at least £500 per term (eg, your maintenance loan/cash from parents) and don't have credit problems.
0% overdraft: Year one £1,000, year two £2,000, year three and beyond £3,000
Unarranged overdraft fees: N/A (you won't be able to use it until you get the balance back under your limit)
Savings protection: Full
Who's eligible: First-year university students (see FAQs)
You need to be 18 or over, studying on a full-time UCAS-registered course that's at least two years long.
Plus, you must apply for the account between five months before the start of your course and two months after it starts, unless you've been a Nationwide member for at least a year – then you can apply up to 18 months after your course starts.
This account's not designed to allow you to do that. But if you do go over your limit, you won't be able to use the account until you get the balance back under your agreed limit – so no debit card spending, no cash withdrawals.
If you're not at the maximum overdraft for your year of study, you can request to increase the limit to the maximum.
Once you've graduated, Nationwide will transfer your account to be a FlexGraduate account. It's not available to apply for – you can only get it if you've had the FlexStudent account.
In the FlexGraduate account, your 0% overdraft tapers off over three years (£2,500 one year after graduation, £1,750 after two years and £1,000 after three years), but other graduate accounts may beat it.
No, there's no interest if you're in credit.
The Santander 123* student account gives accepted full-time students and apprentices a guaranteed £1,500 overdraft in years one to three. You also get a four-year 16-25 Railcard (worth £90ish) which gets you a third off rail travel, though you may not be travelling as much as normal with coronavirus travel restrictions and more online lectures.
If you're in credit, you'll also get 1% AER interest on up to £2,000. To get all of this, you need to pay in £500/term and register for online banking.
0% overdraft: Years one to three £1,500, year four £1,800, year five £2,000
Unarranged overdraft fees: N/A (you won't be able to use it until you get the balance back under your limit)
Savings protection: Shared with Cahoot
Who's eligible: University students about to start or in their first year, or apprentices (unless switching, see FAQs)
You need to be 18 or over, a UK resident and studying in your first year, or about to start a two-year or more undergrad course or a level four to seven apprenticeship.
If you're not in your first year of study you must switch your account from another bank.
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 seven to 10 days to set up, then enter a special code on the railcard website, which is valid for two months ONLY.
Make sure you enter the code within the timeframe, as it won't issue you another code. You'll get your railcard within five working days of ordering.
We valued the railcard by working it out against a three-year railcard which normally costs £70, as four-year cards aren't available for general purchase. The railcard is also available to full-time students aged 26 and over.
Unfortunately the railcard isn't valid in Northern Ireland, although the overdraft still makes this account a decent option.
Yes, if you're in credit you'll earn 1% AER variable on up to £2,000.
As a 123 account holder you're also eligible for savings accounts and loans at preferential rates.
Other student accounts
These accounts aren't our top picks as the overdrafts are all "up to £x" rather than guaranteed as the ones above, so there's a chance the bank won't give you the full amount, making it harder to base your pick on it. We've included the main perks the account offers, though don't be swayed by a freebie if it'd mean a lower overdraft...
|Bank of Scotland||Up to £1,500 in years 1-3, then up to £2,000||Free Totum card, giving access to student discounts|
|Barclays (1)||£500 in term 1, then up to £1,000 in the rest of year 1; up to £2,000 in year 2; up to £3,000 in year 3||12-month subscription to Perlego, which gives online access to textbooks & other reading material|
|Halifax||Up to £1,500||0.1% interest, plus cashback when you spend at certain retailers|
|HSBC||£1,000 in year 1, up to £2,000 in year 2, then up to £3,000||N/A|
|Lloyds||Up to £1,500 in years 1-3, then up to £2,000||Free Totum card, giving access to student discounts|
|NatWest||£500 in term 1, then up to £2,000 for the rest of your time at uni||Choice of 12mth Amazon Prime Student membership, 4yr National Express Coachcard or a 4yr Tastecard|
|Royal Bank of Scotland||£500 in term 1, then up to £2,000 for the rest of your time at uni||Choice of 12mth Amazon Prime Student membership, 4yr National Express Coachcard or a 4yr Tastecard|
|TSB||Up to £1,500 (guaranteed £500 for the first 6mths, up to £1,000 in months seven to nine, and up to £1,500 from month ten)||5% interest on balances up to £500|
Last updated September 2020. (1) Applications open later in September but you can register your interest now
For that rare student breed, the ones who are always in credit, there aren't many choices (even if you're occasionally overdrawn, go for the top overdraft deal).
But, if you don't need your overdraft, there is a way to make it make money for you (though with rock bottom savings rates, it's not going to be much). Here's how to do it...
Please don't even read this unless you're an anally-retentive financial superhero. The consequences of getting it wrong can be a real problem and with low savings rates the current returns just aren't that good anyway.
Those always in credit could PROFIT (provided they're financially disciplined) by opting for the account with the biggest and longest lasting interest-free overdraft and using a budgeting technique we call 'current account stoozing' (see the Stoozing guide for a full definition of the word).
Once you get your account, take cash out of it and plop it into a top-paying instant access savings account (see Top Savings and Cash ISA guides) leaving yourself reasonably near, but never over, your overdraft limit. Make sure you also manage any changes in limits and leave enough room to do your normal spending.
As a result, you're earning interest on money the bank lends you for free. Done right, this can add around £70 to a student's coffers over the length of a course. Similar tricks are possible with student loans (see the Student MoneySaving article). However, this isn't an excuse for spending or borrowing more. If you're not financially disciplined, please DON'T try it.
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 + employment earnings + money from family + any grants/sponsorship money, and that is your income.
While 0% overdrafts are very useful and should help with cashflow 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 guide for more on fees and funding.
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