Student bank accounts

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. The priority is 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 that it outweighs this.

Some banks offer overdrafts that are 'guaranteed', whereas others offer 'up to' overdrafts. If it's guaranteed, you'll definitely get the stated limit if you've been accepted for the account (and asked for the max limit). If the account says you can get 'up to' an amount, you'll only get that amount if you have a good credit record.

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. However, you must usually 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 only need it as 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 it's not actually yours, it's the bank's.

Always budget to stop you spending more than your overdraft limit

The limit the bank agrees is known as an 'arranged overdraft', so is an amount it's happy for you to borrow. However, certain banks won't stop you from spending if you reach that, and you will instead then be borrowing from an 'unarranged overdraft'. 

You won't usually be charged for using this, though it can wreak havoc with your credit rating and ability to get cheap credit in the future as it can appear you're unable to manage your account well. 

If you're struggling for cash, always talk to your bank to see if it will agree an extension to your arranged overdraft first, though of course it's always far better to plan and budget to avoid this.

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.

Not all banks will open a student account for 17-year-olds, but a few do, including Bank of Scotland, Lloyds, NatWest, RBS and TSB.

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. It predicts how you'll behave in future based on your financial past.

As a student, it's likely there'll be very little data on you, which makes credit checking very difficult. Unfortunately this can leave some students rejected due to ridiculous anomalies, and there may be no rhyme, reason or solution to this. Read our Build your credit history and our main Credit scoring guides for more info.

Most banks only let first-year students apply for their current accounts, and some even put a time limit on when you can do that. 

But a few banks do let you switch existing student accounts during your studies. So if you're going into your second, third or fourth year of study and you're not happy with your student account, check to see if you can switch. 

You'll usually get the same terms as others in the same year of study – including any freebies. However, overdraft limits are not transferred, so be sure to check the new account at least matches what you already have.

The opening and switching policies for our top three student accounts are  in this table (if you're switching to a different student account check the bank will allow it)...

Most banks that offer student accounts are part of the Current Account Switch Service. This means you can easily switch your existing bank account – or even another student account – as part of this process.

Just open a new account with your chosen bank, then request a switch through it – the process is straightforward and takes just seven working days. The switching service will automatically close your old account and move your money, direct debits, standing orders and so on across.

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 a 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.

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.

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, then using a budgeting technique we call 'current account stoozing' (see our Stoozing guide for a full definition of the word).

Once you get your student account and overdraft, take cash out of it and plop it into a top-paying easy-access savings account (see our 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 to you for free. Done right, this can add about £80 to a student's coffers over the length of a course. Similar tricks are possible with student loans (see our Student checklist guide). However, this isn't an excuse for spending or borrowing more. If you're not financially disciplined, please DON'T try it.