What is a student bank account and do you need one?

This page includes all you need to know about student banking including how to set-up an account to the perks of having a student account.

Written by Lucinda O'Brien, Editor - Personal Finances

Updated on 15 October 2024

What is a student account?How to set up a student bank account?Student account perks The best student bank accounts What is the average student debt?

If there is one thing this student hub highlights, it’s that there’s a lot to sort out before going to university – from choosing accommodation to buying all the essential amenities you need to make you feel at home from day one.

But one thing you mustn’t forget is to set up a student bank account. Not only are they packed full of perks, but they also give you access to generous overdrafts, which can make your university experience far less stressful.

What is a student account?

Put simply, student bank accounts are bank accounts designed exclusively for people in higher education. They let you put money in and take it out like a normal bank account but have additional benefits, such as interest-free overdrafts or more favourable interest rates on money in the account than on standard accounts.

With more than a third (39%) of students maxing out their overdraft by the end of their first year, it’s important to pick the right account for you and your spending habits. If you’re worried about getting into debt and dipping into your overdraft, our student budgeting guide outlines various methods and tools to help avoid this.

How to set up a student bank account?

Applying for a student bank account could not be simpler, and you can set one up from the comfort of your home.

It’s recommended that you open a student bank account before you start your first year of university. Once you’ve finished your A-Levels and are assured of your university place, look online and compare student current accounts to get the best deal for you.

Steps to set up your own student bank account:

Research and compare your options: Every account claims to offer the best deal, but not all will be right for you. Investigate various bank accounts to find student-friendly accounts with low fees, no minimum balance requirements and other perks.
Gather your essential documents: Most bank account application forms ask for identification, such as government-issued ID (passport or driver’s license), proof of student status (student ID or acceptance letter), and proof of future university address.
Consult friends and family: Your loved ones may be able to offer advice about which banks have the most appropriate accounts for you or be able to give you the benefit of their own experiences.
Visit the bank or apply online: Once you’ve chosen who to bank with, you need to decide whether to visit the bank itself or apply online. Online may be easier as you don’t have to travel, but sometimes it is easier if you let a member of staff talk you through the process step-by-step.
Complete the application: Fill out the application form with your personal details. Provide the required documents and additional information requested by the bank.
Deposit initial funds: If the bank account requires it, you need to make an initial deposit to activate the account. This can often be done via cash, cheque or an electronic transfer from another account.
Set up online and mobile banking: Register for online banking services and download the bank’s mobile app. Set up your username and password, and configure any security settings, such as two-factor authentication.
Await confirmation: Once the application is approved, you’ll receive confirmation from your bank. This might include a welcome kit with your debit card, account details and instructions on how to use your student account.

Student account perks

Although a student bank account may seem like a standard bank account, it can offer various benefits. The most common student bank account perks include:

Interest-free overdraft

The most popular benefit of a student bank account is the interest-free overdraft. An overdraft is an agreed sum of money that you can access even when you’ve run out of money. It is effectively a loan from your bank that you have to pay back when you have the funds to do so.

With a standard bank account, you’d usually pay interest on the amount you’ve borrowed via an overdraft, meaning that you’d have to pay back more than you actually took out. But with a student account, there’s often no charge for this service – as long as you stay within the agreed overdraft limit.

However, you should be aware that your bank will start charging overdraft fees after you have graduated. In the meantime, for many students interest-free overdraft is a significant perk that can help them get out of sticky spots, such as paying for an unexpected car repair or a busted laptop.

However, overdrafts can encourage more reckless spending and leave students with significant debts once they leave university. These debts can be difficult to pay off after your degree is finished.

Free discount cards or discounts

Many student accounts offer discounts for shopping at popular shops, restaurants and applying for specific services. They also offer various other deals and discounts for student-oriented products.

Many student bank accounts also offer incentives to join, such as money-off vouchers for popular high-street stores.

Cashback

In many cases, banks will also credit your account with some money – often around £100 – as a sign-on bonus. Additionally, banks will offer alternative rewards programs, where you can earn a percentage cashback when you use their debit or credit card to make purchases.

The best student bank accounts

Not sure how to choose a student bank account? The best thing to do is to analyse your options and look at what different bank accounts can offer.

Santander

The Santander Edge Student Current Account comes with various benefits that attract many students year after year. For each year of a three-year degree, students get a £1,500 interest-free overdraft facility. If you decide to do a Master's degree, you can go overdrawn by £1,800 in year four and £2,000 in year five and beyond.

In addition to this, Santander offers a free four-year 16-25 railcard, meaning that you’ll get a third off all rail travel across Great Britain.

All that Santander asks in return is that you pay at least £500 into your account every four months, and use it as your main current account. According to Save the Student, Santander offers the most popular student bank account in the country, with 20% of students favouring their deal.

HSBC

HSBC’s student banking account works slightly differently. In the first year of your course, you can have an overdraft of up to £1,000. In the second year, the maximum amount rises to £2,000 and then increases to £3,000 for the final year of your undergraduate degree.

You also have access to HSBC’s home and away perks. These give all HSBC cardholders offers on shopping, dining, travel, experiences and more.

Nationwide

Nationwide offers similar benefits to HSBC, with a tiered system that increases as you progress in your university course. You can apply for an overdraft of up to £1,000 interest-free in your first year, £2,000 in your second year, and £3,000 in your third year.

Other perks include a greater sense of inclusion within your community, as the Nationwide app allows you to get involved in community boards and help choose which boards the building society should support.

Natwest

Natwest’s student account offers the largest overdraft for the first year. Students can accessan extra £2,000 in their first year alone, albeit with a limit of £500 in their first term. Students can then apply for a limit of up to £3,250 interest-free from their third year.

Natwest’s tastecard gives you a discount at various major restaurants, including Zizzi, Ask Italian, and Burger King, which is worth £55 per year.

Barclays

For the more academically minded student, Barclays might be the way to go. Barclays offers a £1,000 overdraft in the first year of study, which increases to £1,500 for years two and three.

What sets their offer apart is that it comes with a free 12-month subscription to Perlego’s online library of books and academic texts, effectively saving you £96, which is the current price of Perlego’s annual plan.

What is the average student debt?

In 2010-11, the average graduate in England was in £16,160 of debt when starting to pay back their student loan. This was 168% more than the average debt in Scotland, almost a quarter (23%) more than in Wales, and just under a tenth (8%) more than for a Northern Irish student.

A breakdown of the student loan debt on entry to repayment

Year	England	Scotland	Wales	Northern Ireland
2010/2011	£16,160	£6,020	£13,080	£14,920
2011/2012	£16,990	£6,500	£13,500	£15,680
2012/2013	£18,620	£6,930	£14,840	£16,810
2013/2014	£20,040	£7,490	£17,240	£17,340
2014/2015	£21,160	£9,480	£19,000	£18,040
2015/2016	£24,400	£10,410	£15,970	£19,610
2016/2017	£32,340	£11,720	£19,120	£20,840
2017/2018	£34,450	£13,200	£21,440	£22,310
2018/2019	£35,670	£13,690	£22,770	£23,250
2019/2020	£40,010	£13,930	£24,860	£23,250
2020/2021	£44,740	£15,130	£27,520	£24,400
2021/2022	£44,730	£14,770	£33,560	£23,920
2022/2023	£44,940	£15,430	£35,780	£24,500

Source: Statista

Between 2010-11 and 2016-17, the amount of student debt English graduates had when it came to paying back their student debt doubled to £32,340. And it rose sharply againbetween 2016/17 and 2022/23, with the amount of debt rising by 39% to £44,940.

In 2022-23, students in England had a student debt that was 83% greater than students in Northern Ireland, and a quarter (26%) more than in Wales.

Read more student statistics, including data on applications, student employment rates, and more.

A breakdown of outstanding student loan debt in the United Kingdom from 2013/14 to 2022/23 (£ billion)

Year	England	Scotland	Wales	Northern Ireland
2013/2014	£54.36	£3.10	£2.61	£2.16
2014/2015	£64.74	£3.54	£2.93	£2.43
2015/2016	£76.25	£3.99	£3.27	£2.71
2016/2017	£89.34	£4.48	£3.65	£2.99
2017/2018	£104.46	£4.98	£4.11	£3.29
2018/2019	£121.81	£5.52	£4.69	£3.60
2019/2020	£140.09	£5.96	£5.34	£3.85
2020/2021	£160.59	£6.45	£6.16	£4.13
2021/2022	£181.61	£6.98	£7.05	£4.39
2022/2023	£205.57	£7.56	£8.04	£4.68

Source: Statista

Data shows that in 2013–14, the total student debt in England was £54.36 billion. This was 17 times the debt in Scotland and almost 21 times the debt in Wales.

Between 2013–14 and 2018–19, the level of student debt in England increased by 124% to £121.81 billion. By this point, it was 22 times that of Scotland and almost 34 times that of Northern Ireland.

Between 2018-19 and 2022–-23, England’s level of student debt increased by close to seven-tenths (68%) to £205.57 billion – more than 25 times that of Wales.

FAQs

Does student overdraft affect credit score?

A student overdraft typically does not directly affect your credit score unless you fail to repay it on time, leading to missed payments or the overdraft becoming ‘delinquent’. Either of these can negatively impact your credit.

Can you have more than one student account?

Theoretically, yes, you can have more than one student bank account, but it’s important to check the terms and conditions of each bank, as some may limit the number of student accounts you can open with them. However, multiple accounts could affect eligibility for certain student benefits, like interest-free overdrafts.

Can a student get a mortgage?

Yes, a student can get a mortgage, but it can be challenging. Most lenders require a stable income and a good credit history, which students often lack. However, some students may be eligible if they have a significant deposit, a guarantor, or additional sources of income, such as a part-time job or support from family.