Learn more about student finance and choosing the right bank account for university
It might not be quite as important as picking the right university or the right course, and it’s definitely not the most exciting part of going to university, but choosing the best student account for you could save you money, as well as making your time at university and the first few years after you graduate run more smoothly.
Compare current account providers to see if you can find an account that suits you while you study. From interest free overdrafts to managing your finances after you graduate, our guide to student bank accounts can help you stay financially sound while you study.
What are the advantages of a student bank account?
The advantage of a student bank account is that it is specifically designed for the needs of students and to make the financial side of university life less of a trial. The biggest benefit of student accounts is the interest free overdraft that many of them come with.
While you study, your overdraft will be interest free up to an agreed limit, which in most cases increases incrementally for every year of study.
After you graduate, you will start paying interest on some or all of the balance of your overdraft. Student bank accounts also have other perks, like exclusive discounts, free gifts and dedicated student finance advisors.
Some student bank accounts will have interest free overdrafts for the duration of your degree and for one year after you graduate, allowing you time to pay it off once you start working, but make sure you pay this off as soon as possible.
Who can have a student bank account?
Each bank has slightly different rules about who will qualify for their student account. As a general rule, if you’re studying full-time for a degree, a degree-equivalent or a postgraduate course, you should qualify.
However, some banks will accept people who are on non-degree or other higher education courses – so if in you’re in any doubt about whether or not you qualify, check with the bank.
You can now switch to your new student bank account within 7 working days with the government-backed current account switch guarantee
Part-time students are less likely to qualify as they are usually able to work full-time while they study, so you may want to check with your learning institute to see what financing options you have to help you along the way.
Pick the best student account for you
- How will you use your account? If like most students, you need to borrow some money to help you through university (in addition to your student loan) then the overdraft will be the most important thing to think about when you choose your account. You can get an interest-free overdraft of up to £3000, but don’t automatically pick the biggest one – you should think about how much you actually need to borrow, and look at the interest rate you will eventually have to start paying too. If you don’t need an overdraft, opt for the account which will pay you the most interest on your balance.
- What happens to the student bank account when you graduate? Don’t forget to think about what happens to the account after you’ve finished university. For example, how soon will you have to start paying off your overdraft, what rate of interest will you have to pay and whether will you get any extra perks or services as a graduate? However, remember that you aren’t tied to your student account once you graduate, and you can switch to a different account if you find a better offer later on. Student bank accounts usually maintain your student overdraft rate for one year after you graduate, but this varies with each provider. Once you start working, it makes sense to set aside some of your monthly income to pay off your balance as soon as possible. Having overdraft debt could affect your credit score if you plan to apply for a credit card or loan or mortgage. Plus, new graduates tend to have a lower credit score than most people as they have not yet had a chance to show that they can manage credit and pay off debts on time.
- What gifts or freebies are on offer? Many banks offer incentives like music downloads, cinema vouchers, rail cards or cash in return for opening a student bank account. Don’t be swayed too much by freebies – there’s no point getting an account that doesn’t suit you just because they give you £50 – it could end up costing more in the long-term. Also, many of these offers are subject to availability, so you may find that by the time you have applied for the account they no longer have those MP3 players in stock.
- What other services are available with the student bank account? For example, what sort of debit card do you get and where can you use it? You’ll also want to think about whether you can get a student credit card from your bank. Being able to get a credit card early on can help improve your credit rating and if you can prove that you can manage credit, then by the time you graduate you could be ready to apply for other credit products as and when you need them.
- Is there a branch near your campus and does the account have online or telephone banking? Does the bank have a good online account management system? You will most probably not want to keep visiting the branch when you have lectures and deadlines to think about. Some banks like First Direct are purely online and telephone based, but you may also want the flexibility of having a branch you can visit to resolve any issues you have face to face.