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Student bank accounts

The need to manage your finances ramps up the minute you decide to become a student. With that in mind, we’ve compiled a guide to help you choose the best student bank account for you.

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What is a student bank account?

A student bank account is a current account that’s designed for people in higher education. These accounts include certain benefits tailored to students. Usually, the main benefit is an interest-free overdraft.

This means that, while you’re a student, you don’t need to pay any interest if you dip into your ‘arranged’ or ‘agreed’ overdraft.

You may need to start repaying your overdraft once you’ve graduated. Often, when you graduate you can switch to a graduate bank account. Typically, these accounts let you use an interest-free overdraft in your first year following university. After that, the interest-free provision is normally reduced by the bank, year on year.

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Am I eligible for a student bank account?

Typically, if you’re over 18 years old and you have an unconditional offer from UCAS (the Universities and Colleges Admissions Service) for a full-time course at a UK university, you’ll be eligible for a student bank account. Banks may ask for your UCAS status code to confirm you have been accepted on a course.

If you have a conditional offer from UCAS, you’ll first need to show A-Level results that prove you’ve met the condition or a letter from your chosen university confirming you’ll be studying there. Either way, you should have time to get your student account set up before the start of freshers week.

However, the eligibility requirements might be different if you’re applying for a degree-equivalent course, a postgraduate course or entering part-time study. While some banks will accept people on other types of course, part-time students (in particular) may find it less straightforward. So you need to be clear that your circumstances match the requirements set by the bank.

How to open a student bank account

If you’re eligible for a student account, opening one is a simple process that can usually be done online or in a branch. To open an account, you’ll need to show:

  • Proof of identity: typically, you’ll need to supply one or two forms of ID, such as your driver’s licence and passport.
  • Proof of address: this could be a utility bill or bank statement. Some banks will want you to prove that you’ve been living in the UK for the previous three years.
  • Proof of your student status: this could be your UCAS status code or a letter from your chosen university confirming that you’ve accepted a place on a qualifying course. 

Once you’ve opened your account, be sure to update your information with Student Finance. This will make sure that any student loans or grants are paid into your new account. You might need to ensure that your student finance is paid into your student bank account to benefit from any included interest-free overdraft. 

When should I open a student bank account?

You can apply to open a student bank account as soon as your A-Level or Scottish Highers results are in, and you have a place confirmed at your chosen university. You may be able to apply up to six months in advance of your course starting if you have an unconditional offer from UCAS.

Many high street banks offer their best deals for students in July and August, in the lead up to new the academic year. So even if you can apply early, you might want to wait until then to compare your options.

Setting your account up before the start of term means you’ll have plenty of time to set up your bank account with your student finance body, as well as arrange any payments for your accommodation, utilities, phone bill and student contents insurance.

It also means you’ll have extra time to take advantage of any exciting freebies offered by your bank.

What are the benefits of a student bank account?

Unlike other current accounts, many student bank accounts offer the benefit of an agreed interest-free overdraft. With some banks, this could mean you can borrow up to £3,000 during the course of your studies and you won’t have to pay any interest on that overdrawn balance until after you graduate.

When you compare student bank accounts, as well as looking at the student overdraft available, it’s worth considering what freebies are on offer. While you should never make your decision based on these perks alone, they can certainly sweeten the pot.

Deals vary but you could get extra benefits like:

  • A free young person’s railcard for a 1/3 off train fares throughout Great Britain
  • Cashback when you use your card to pay at certain retailers
  • Discounts at participating restaurants
  • Subscriptions to apps or services.

What are the disadvantages of student bank accounts?

Although student bank accounts may be the right choice for some, there are disadvantages to consider, including:

  • Student bank accounts often pay less interest than regular accounts. That means it might not be the best option for you if you’re always in credit and are hoping to gain interest on your money.
  • Some people may find the interest-free overdraft too tempting and end up spending more than they should. It’s important to remember that an overdraft is not free money. Even if it’s interest-free while you’re studying, at some point you’ll need to pay it all back.
  • If you’re an international student coming to the UK to study, you’ll need to look for a bank account that’s designed specifically for international students and it’s unlikely you’ll be able to benefit from such a generous interest-free overdraft. 

What do I need to watch out for when looking at overdrafts?

It’s really important that you check the terms of any prospective overdraft. Check if the overdraft is ‘guaranteed’ or ‘up to’ – the latter means you’ll probably only get the advertised overdraft if you have a good credit record.

Typically, banks will allow you to increase your overdraft limit over the course of your study, for example, offering up to £1,000 in your first year at university and up to £2,000 in your second year.

Before you apply for any new bank account it’s a good idea to check your credit score. Your bank will perform a credit check on you when you apply for a new student bank account and each time you apply to increase your overdraft. It’s important to understand how an overdraft can affect your credit score.

Having a decent-sized, interest-free overdraft doesn’t mean you have to use it. You should always aim to budget so that, whenever possible, you keep your balance in the black. Remember that you’re going to have to pay it back once your studies are complete.

How to find the best student bank account

There are several key features to consider when looking for the right student bank account for you:

Overdraft limit

Many students end up dipping into their overdraft at some point, so finding one with the right limit for your needs is key. Overdraft limits usually run up to between £1,000 and £3,000 although you may have to apply to increase your limit after your first year of study.

Be careful with these limits. Just because you can use it, it doesn’t mean you should. Remember that you have to pay it back at some point.

Rewards and gifts

The market for current accounts is a competitive one, so banks are regularly offering incentives to tempt students to open an account. Some student bank accounts offer free railcards, discounts with partners or even cash rewards. Just make sure that you don’t sacrifice other important features for the sake of a one-off benefit.

Interest rates

While you’re probably not going to get the best interest rates with a student account, it does quite literally pay to compare rates when looking for an account. At Compare the Market, we can help you easily compare these rates to find the right overall fit for you.

Frequently asked questions

What are the best savings accounts for students?

The best type of student savings account for you depends on your saving needs:

Will I get the maximum student overdraft?

To see if you’ll get the maximum student overdraft, check to see if it’s ‘guaranteed’ or advertised as ‘up to’.

  • Guaranteed means that if you continue to meet the terms of your account, you’ll have access to the full amount advertised.
  • Up to means you’ll need to undergo a credit check to determine your personal limit. The maximum student overdraft is something that varies between account providers. Overdrafts on student accounts typically can range between £1,000 and £3,000. Some banks will set a lower limit for your first year – or your first term – and then allow you to increase the limit for the rest of your time at uni. It’s well worth shopping around to find the student overdraft that works best for you.

What happens if I exceed my overdraft?

Your bank may allow you to go over your overdraft limit into an unarranged overdraft, or they might simply decline the payment.

Your bank will report any use of an unauthorised overdraft to the main credit reference agencies. If you stay over your limit for more than 30 days, it will have a negative impact on your credit history.

An overhaul to overdraft rules April 2020 means banks can no longer charge higher fees for unauthorised overdrafts. You’ll now pay the same interest rate on your overdraft, regardless of whether it’s authorised or unauthorised.

That may seem like good news for students but remember – the way you handle your overdraft now could affect your ability to get credit in the future.

What happens to my student current account after I graduate?

After you’ve graduated, your student account will likely be automatically converted into a standard current account or a graduate account. You’ll lose access to the perks of your student account, and if you’re switched to a current account you might have to start pay interest on your overdraft immediately.

Switching to a graduate account may give you a little longer to pay off your interest-free overdraft. Graduate accounts also often come with enticing rewards included so it’s a good idea to shop around before you switch to make sure you’re still getting the best deal for you.   

Can I have more than one student bank account?

Although you can have multiple current accounts or savings accounts, you’re unlikely to be allowed more than one student account. Usually, a condition of receiving the perks of a student account is that you pay your student loan into that account. Banks regularly check to see that this is happening.

Can I switch my student bank account?

It’s possible to switch your student bank account. Have a look for bank account deals that are open to students at any point in their studies, rather than those specifically for people in their first year.

See our guide to switching bank accounts.

Can I get a student bank account with bad credit?

A bad credit rating is likely to significantly impact your ability to get a student bank account.

However, you might be able to apply for a regular bank account. Have a look at our guide to getting a current account with bad credit.

To improve your rating, first understand why it’s bad. Check your credit report for errors – you can do this for free with the main credit reference agencies. If you spot any inaccurate information, you can contact the lender that made the mistake and ask them to put it right.

Also, look to see what you can do to improve your rating – for example, do you have any outstanding loans that, with work, you could pay off?

If all else fails, it could be worth speaking to your student services department about financial assistance. Find out about university and college hardship funds on GOV.UK.

Can mature students get a student bank account?

Yes, mature students should be able to get a student bank account. Banks usually require a minimum age of 17 or 18 to open an account, but there’s no maximum age, as long as you can prove you’re a student. 
 
If you’re a mature student, check the terms of the student account carefully to make sure that it’s worth switching from your current bank account.