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A guide to student bank accounts

Written by: UPSU

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Whether you are a new student or returning student, you may have heard of a ‘student bank account’ before, but what is a student bank account and how is it different to a standard bank account?

A student bank account is a bank account designed for individuals in higher education (i.e., university). These accounts allow you to pay money in and out and offer additional benefits such as freebies and an interest-free overdraft. 

What is an overdraft? An overdraft is where the bank allows you spend more money than you have in your bank account up to a set amount. For example, if you have a £100 overdraft limit, this means you can spend an additional £100, but no more than this, after you bank balance hits £0.

Often banks will charge large fees and interest for going into an overdraft, but a student bank account overdraft is interest-free, meaning you pay back nothing more than what you borrow.

Whether you are a student or not, going into an overdraft is still considered ‘debt’ and should not be used haphazardly, however, a student account overdraft is a great buffer for students in case you run low on money and need groceries or in case of emergencies. 

It is very important that students never go over the agreed overdraft limit. If you do go beyond your overdraft limit, chargers could skyrocket, and you may get stuck in a vicious cycle that’s hard to escape. Staying within your limit is the safest way to use your student bank account overdraft. 



What do you need to think about when choosing a student bank account? 


Many UK banks will provide student bank accounts, however, they will all differ in what they offer. Here are five things to keep in mind when deciding which bank to go with when opening a student account: 

1. Don’t be fooled by freebies. Many student bank accounts will try to reel you in with freebies, such as products, travel discounts and ‘exclusive’ offers, and whilst a freebie is a nice additional bonus, you certainly should not select a student bank account based on the promise of discounts or a free item. In many cases, banks that offer a lot of freebies often offer some of the lowest student overdrafts. Remember, a student bank account offering a freebie worth £25 is nothing compared to a large interest-free overdraft for many years. 

2. The largest student overdraft may be the best choice. Remember, a student bank account has an interest-free overdraft: so, take full advantage! Whilst we do not suggest that students rely entirely on their overdraft, we do recommend having the largest overdraft just in case you need it in an emergency. If you wanted to be smart with a large interest-free overdraft, you could transfer some of it to a savings account and make money by earning interest on the borrowed money whilst you are a student. Keep in mind, however, that the interest-free period does not last forever. Depending on which student bank account you go with, the interest-free period will only last a certain amount of time after you graduate before interest changes begin. 

3. Understand the repayment conditions. You most likely will not have to repay your student bank account overdraft for a while after you finish university, however it is important to know how long you have to repay your interest-free overdraft before the bank makes a sudden demand for it all to be paid back. So long as you understand the conditions and you do not treat your overdraft as free money, you will not be hit by any sudden surprises.

4. Make sure you know if a student bank account overdraft is ‘up to’ or ‘guaranteed’. Banks will advertise the interest-free overdraft as usually the maximum they will offer, for example, ‘We offer an interest-free overdraft of up to £2000.’ Beware of the words ‘up to’, as for many banks, this amount is only available in your final year of study and only to students who have a good credit score and pass their affordability checks. 

5. Be aware that banks may try to sell you other things you may not need nor want. When you open a student bank account and you pass the bank’s affordability checks, your bank may suggest getting a credit card. Just because the bank says you can have a credit card, does not mean you should. Think carefully about whether you need a credit card on top of your interest-free overdraft, as most credit cards will not have the same student-friendly interest rates and you could end up getting yourself in a poor financial state before your life after university has even begun. 



What do you need to open a student bank account? 


Just like opening a standard bank account, you will need proof of address and identity. This can include your passport, birth certificate or UK driving license. With opening a student bank account, you may also need your UCAS code or confirmation letter with an unconditional offer. If you do not have an unconditional offer, some banks may accept proof of A-level results that meet the conditions of your offer, or a letter from the university to confirm you have a place. This means you may be able to open your student bank account before you officially start university, meaning you can tick one thing of your to-do list and make full use of the account benefits before you start your first academic term. Most UK banks allow students to apply for a student bank account within six months of their course start date.

Most banks allow you to apply online for a student bank account. Once you’ve chosen a student bank account, go to their website and complete an online application.

Once you have opened a new student bank account, remember to update your Student Finance body, and let them know your new bank account details. 



Where do you go from here?


Remember, there are many different student accounts with different deals and benefits. It is important you take your time and look around for the best one for you. 

You could start by browsing different options on Save the Student, which offers a comparison of what the top banks have to offer students in 2023, including student satisfaction scores and reviews. If you are an international student, you can also see which bank accounts are open to non-UK students and how to go about opening an account whilst you study in the UK.

We recommend you do your own research using a variety of trustworthy sites or visit banks to discuss student bank account options in person. Keep in mind that if you are already a student, you can switch to another student account during your course.

If you are concerned about opening a student bank account or worried about scams, please get in touch with our SU Advice team who can support you by providing free independent and confidential advice and resources:


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