Hundreds of thousands of students have secured university places following their A level results last week and may be wondering which student bank account they should choose.
Student bank accounts, as the name suggests, are designed specifically for those in higher education, and usually offer generous interest-free overdrafts to help students manage their money, and sometimes other perks too.
Here are some of the things you need to think about when picking a student bank account, along with a round-up of some of the best accounts on offer.
The overdraft is key
Being a student is expensive, and given that the vast majority of students starting university this autumn will be reliant on student loans or the Bank of Mum and Dad to make ends meet, most will be on a tight budget.
This means that an interest-free overdraft is likely to be essential, so it’s worth picking an account which provides a decent overdraft limit. Bear in mind, however, that when you go into your overdraft you’re borrowing money which will need to be paid back eventually, so try not to max out the amount you go into the red unless really necessary.
A recent annual survey by Save the Student found that 36% of students said they use their overdraft as a source of income. A spokesman for Save the Student said: “Finding an overdraft with 0% interest is crucial. You're probably going to spend a good few years in your overdraft, so the last thing you want is to be accumulating extra charges on what you spend. Not every bank will give you an interest-free student overdraft, so make sure you check this.
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“Some high street banks offer an overdraft of 'up to' £3,000, but how much you actually get depends on your credit rating and what year of university you're in.”
Banks and building societies offering generous interest-free overdrafts include HSBC and Nationwide Building Society, which both offer up to £1,000 in the first year, up to £2,000 in the second year and a maximum of £3,000 in year three.
Although student bank account perks can be really tempting, it’s worth making sure that the bank account will actually suit your needs before you look at these.
Bank and building societies offering generous perks include Lloyds Bank, Bank of Scotland, Halifax, HSBC, Nationwide Building Society, NatWest and Royal Bank of Scotland, all of which offer students £100 cashback to open a student account with them.
Katie Brain, consumer banking expert at Defaqto said; “The main incentive for student accounts this year is cash. Six major banks offering cashback to students is the most we have seen in some time. Last year there were only two offering £100 cash (HSBC and Nationwide) plus two offering £80 (NatWest and Royal Bank of Scotland. Providers are really competing for new student accounts this year because they see them as the next generation to hold their finances with them.”
HSBC also offers student account holders a one-year free subscription to meditation app Headspace, whilst Natwest and Royal Bank of Scotland each provide a free four-year restaurant discount tastecard. For those students who may live a long way from home and plan to use the train to get home, Santander offers a free four-year 16-25 railcard which gives a third off the cost of rail fares.