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 so you’ll be well placed to choose the current account that’s right for you.
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What is a student bank account?
A student bank account is similar to any other current account, but it comes with some benefits tailored to people in higher education. 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 on anything within the allowed overdraft limit. This is sometimes called the ‘arranged’ or ‘agreed’ overdraft. If you spend over and above your overdraft limit, you might be charged.
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.
Am I eligible for a student bank account?
Typically, if you have an 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. However, it 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.
To apply for a student bank account, make sure you have two forms of identification and proof of address to hand, as well as your proof of student status (either a letter of acceptance from your university or your UCAS offer letter).
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. Like any bank account, you’ll need to supply two forms of ID, like your driver’s licence and passport, as well as proof of your address, which can come in the form of a utility bill or bank statement. The only difference is that you’ll also need to prove your status as a student. This could be a letter from your university or UCAS, confirming a successful application to study. If you apply for your account online, you can simply post your documents to your local branch. These must be original versions of the documents. Photocopies will not be accepted.
Once you’ve opened your account, be sure to update your information with Student Finance, to make sure that any student loans or grants are paid into your new account.
When should I get a student bank account?
Many people apply for a bank account as soon as they receive their firm offer from UCAS. You might need your account for practical things, like paying your rent, utility bills and student insurance. Having the account already set up and ready to go could make life a little bit easier for you.
What are the advantages of student accounts?
Many student bank accounts will allow interest-free overdrafts up to an authorised overdraft limit of £3,000 during the course of your studies. Assuming you stay within your authorised limit, you won’t have to pay any interest on that overdrawn balance until after you graduate.
You should always aim to budget so that, whenever possible, you keep your balance in the black. However, having a student overdraft will allow you to borrow more money than you have in your account (should you need to) at no charge – up to an agreed amount. This figure will be your authorised overdraft limit.
When you sign up with a bank, you might be offered freebies, like railcards or Amazon vouchers. While you should never make your decision based on these deals alone, they’re sometimes combined with decent overdraft limits too.Compare student bank accounts
What do I need to watch out for when looking at overdrafts?
It’s really important that you check the terms on any prospective overdraft so that you’re aware of what you’re getting yourself into with any new deal. 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.
Having a decent-sized, interest-free overdraft doesn’t mean you have to use it – 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 look for with a student bank account:
- Overdraft limit – arguably the most important, many students end up dipping into their overdraft at some point, so finding one with the right limit for your needs is key. Just be careful with these limits. Just because you can, doesn’t mean you need to use it, and you have to pay it back at some point. Overdraft limits usually run up to between £2,000 and £3,000. Find the right one for your needs.
- 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. These range from free student rail cards, 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.
What else should I know about student current accounts?
As with many other applications for credit, a bank will usually check your credit history before approving or rejecting your application. You should be aware that making multiple applications could have an adverse effect on your credit score. That’s because credit score companies and lenders might assume that the applicant has serious financial troubles.
It’s best to look around before you commit and just apply for the bank account you think is right for you. It might also be a good idea to check your credit score before you apply, to make sure everything is in order.
We’ve put together a very simple comparison service that will show you what student bank accounts are available, including overdraft facilities and details of other features.
What happens to my student current account after I graduate?
Student bank accounts come with perks designed for students. You need a letter of attendance to maintain your student account. Without one, after you’ve graduated your student account will likely be automatically converted into a standard current account or a graduate account, as explained above.
Graduation is a good time to think about what you’re likely to do next (travel, work, etc) – and get the right bank account for you.
Can I have more than one student bank account?
Although you can have multiple current accounts or savings accounts, 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. For that reason, you’re unlikely to be allowed more than one student account.
What are the disadvantages of student bank accounts?
What’s good for one person might not be right for the next. Student bank accounts often pay less interest than regular accounts – not great if you have a sum of money and are hoping to gain interest on it.
Also, although many people might welcome an interest-free overdraft, some might be tempted to see this as ‘free money’ and spend more than they should.
It comes down to individual life circumstances and knowing what’s right for you.
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.
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.
First, understand why you have a bad credit rating. Do you have outstanding loans that, with some work, you’d be able to pay off? Resolving bad credit is the first step towards improved financial health.
Also, 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.
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.
Frequently asked questions
Will I get the maximum student overdraft?
The maximum student overdraft is something that varies between account providers. Overdrafts on student accounts can range between £500 and £3,000, so it’s well worth shopping around to find the best overdraft limit.
While student overdrafts offer a 0% interest option, it’s important that you only use what you really need. Once your student account expires (there are further options for graduates), you’ll then need to seriously think about how you’re going to pay your overdraft back. If you run your overdraft to the limit, you may struggle to pay off your debt.
When comparing overdraft limits, check to see which are guaranteed and which are an ‘up to’ overdraft. Guaranteed means exactly that, as long as you continue to meet the terms of your account, you will have access to the amount advertised, whereas an ‘up to’ overdraft means you may not have access to the full amount, and will need to undergo a credit check to determine your personal limit.
If you need to extend your limit with your account provider, you will need to discuss this with your bank. This will likely involve a credit check.
What happens if I exceed my overdraft?
If you go beyond your overdraft limit, you could face the prospect of hefty fines and a poor start to your credit history. Your bank could also cancel your overdraft and make you pay back all the outstanding amount.
However, changes to the way overdrafts work were introduced in April 2020, which now prevent banks from charging higher fees for unauthorised overdrafts. The interest rate on overdrafts will now be charged at a single rate, regardless of whether it’s an authorised or unauthorised overdraft. These rates are still significant, typically ranging between 20-40%.
If you find yourself in financial difficulty with your overdraft, the best thing to do is simply speak to your bank or account provider as soon as you can. Provide as much detail of your situation as possible, and they will be able to explain your options. The sooner you contact them, the sooner you’ll be able to come to an agreement which may help improve your situation.
What type of freebies are available?
Student account freebies come in a variety of forms, these can range between gifts, vouchers, discounts or even cashback. While there are plenty of important parts to choosing the right student account, the right freebie could make the difference.
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.
Do student current accounts pay interest?
Some banks offer interest on money saved; others offer more competitive sign-up freebies, or larger overdraft facilities. Check the benefits of each account carefully to make sure you’re choosing the right one for you.
You can usually expect to receive an interest rate of up to 1% with a student bank account, with the ability to earn around £1,000 a year in interest, and sometimes more, before hitting a cap.