Words by: TSR staff

Opening a student bank account is one of the first things you need to do before going to university, as it will be essential for managing your money away from home.

The main difference between a student account and a standard current account is the interest-free overdraft offered, which most students will need at some point. It is a good idea to open a student account before you start university, especially if you are applying for a student loan as the money will be paid directly into your bank account and it can be a pain to change accounts after you arrive.

Most banks offer 'freebies' such as vouchers to entice you in to opening an account with them. It's important to look past these freebies and focus more on the long-term benefits but if you're stuck between which bank to choose, remember that a 16-25 Railcard will be more useful in the long-term than say, a cheap MP3 player. Many students will find they frequently need to make use of their bank's overdraft facility, so try to choose an account which offers the largest interest-free overdraft, but bear in mind you might not be entitled to the full amount as advertised. The amount of overdraft you get will most likely depend on your circumstances and whether you make regular payments into your account. Always read the small print so you know about any fines/charges that you could incur as a result of going over your agreed overdraft limit and the interest rate that could apply, and get clued up on how to avoid doing so!The vast majority of freshers open student accounts

What you need to open an account

To open a student account you may need to produce:
  • A copy of your student loan financial assessment form
  • Proof that you are in fact a student (usually the AS12 letter from UCAS)
  • Photographic identification, e.g., passport, full driving license. Overseas students should produce their passport and letter of admission or enrolment from the university
  • Proof of term-time or home address. This should be an official document eg, bank statement, utility bill

Points to consider

Branch location and facilities:
  • Is my branch near enough for me to call in to discuss my finances?
  • Is there a cash machine on campus or close to where I live?
  • Can I use my cash machine card at other banks' machines without being charged?
  • Is there a student adviser? You will need a familiar point of contact who is sympathetic to students and aware of their financial situation.

Overdraft facilities:
  • What sort of interest free overdraft is available and how do I apply?
  • Do I need to attend an interview with the student adviser before an overdraft can be arranged?
  • Can I extend my overdraft limit and how do I do this?
  • What happens if I exceed my overdraft limit?
  • Always consult with your bank before going overdrawn outside of any pre-agreed limit, as banks often impose stiff penalty charges on unauthorised overdrafts.
  • Remember the bank may describe your overdraft as 'free' but you still have to pay it back so use it carefully. You might for example, be given an agreed overdraft limit of £1,000 in your first year, £1,250 in your second year and £1,500 in your third year, but this does not mean you will be allowed £3,750 in total.

Bank charges:
  • Does the bank charge for services? Most banks will not charge for their services whilst you remain in credit or stay within an agreed overdraft limit.
  • Will I receive interest on credit balances?

Graduate package:
  • Does my branch offer preferential terms to graduating students? (Most banks do this. These include cheaper overdrafts and possibly loans to consolidate overdrafts and other debts)
  • For how long after my course has completed can I expect to receive preferential student terms?

Things to ask your bank

You'll want to be able to withdraw cash easily and simply
  • What can the bank do to help out if my first loan installment is late?
  • What sort of credit card facilities does it offer?
  • Does it charge commission on travel money? (several banks do not charge students)
  • What savings facilities and incentives are on offer?
  • Is there telephone banking and/or banking via the internet?

The difference between debit and credit cards

Debit cards

Debit cards are issued by your bank and are directly linked to your bank account. Whenever you make a transaction using a debit card, e.g., in a shop or online, the funds will be immediately debited from the account which the card is linked to. In addition to in-store and online payments, debit cards can also act as an ATM card, allowing you to withdraw money from any cash machine.

There are several types of debit card, but they all perform the same functions as above. It should be noted however that some are more widely accepted than others. If you're using a debit card in a shop or online, you need to make sure that the type you have is accepted. Most student accounts come with a Maestro (formerly Switch) or Visa debit card, which are the most widely accepted.

Credit cards

Credit cards can be issued by your bank, but are also available from other companies who only provide credit cards. You can apply for a credit card with any provider (subject to their eligibility criteria), which may or may not be your main bank.

Most uni students decide to have a student accountCredit cards let you buy goods and services straight away and pay later, so using one is essentially like taking out a short term loan. This can seem like a convenient way of paying for goods and services, but be aware that if you don't repay the full balance to credit card provider within a certain time you will be charged interest on the outstanding amount borrowed, often at a fairly high interest rate. This interest-free period varies, but is generally up to 56 days. You have to be very careful to keep track of your spending when using a credit card as you can run up significant debts without noticing. For longer-term borrowing, taking out a bank loan might be cheaper as this could have a lower rate of interest.

If you're buying anything over £100, paying for this using a credit card can give an extra form of protection in case of anything going wrong with the purchase. This stems from section 75 of the Consumer Credit Act 1974, which states that if you pay for goods worth over £100 on a credit card (even if only partially paid by credit card) then the credit card provider is equally liable with the retailer. If the merchant goes out of business and you don't get your goods or you have a problem covered by your statutory rights, you can go straight to the card issuer and get a full refund!

You can withdraw money from cash machines on a credit card. However, this should be avoided in most cases as it is often very expensive - interest starts to accrue immediately once the withdrawal is made and there is also usually a fee just for for making the withdrawal.

When dealing with credit card companies, APR refers to Annual Percentage Rate. It is a measure of the actual interest you would pay over a whole year as opposed to the monthly percentage rate and is intended to give a more accurate idea of how much you're being charged when you borrow money. Generally, the lower the APR, the less money you will have to pay back in interest. It is important to make sure you compare the APR of different credit cards when deciding which one to take out. Some card issuers may offer a low rate of interest for an initial period but this will increase at the end of that period.

Remember: if you pay back the minimum you're not only not paying back the initial bulk of debt, but you're also gaining "interest" (in a BAD way) from the bank. If you use your credit card, make sure you pay it off in full every month if at all possible.

It may be useful to get a credit card for emergencies only. Make sure you know the PIN or it'll be of no use in such an emergency!

Comparing banks offering student accounts: A-Z

So now you have a small idea of the student banking system, let’s take a look at all of the players in this market:


Barclays offer maximum overdraft of £3,000 after year one
  • £200 interest free overdraft upon opening the account
  • Up to £2,000 interest free overdraft in first year
  • £1 daily fee for overdrafts that are between £2,000 and £3,000
  • Maximum £3,000 at a variable annual interest rate (traditionally around 8.9%)
  • Visa debit card
  • Mobile banking through downloading the smartphone app: 'Barclays Mobile Banking'
  • Free SMS text alerts
  • Continuing interest-free overdraft after graduation
  • Debit cards delivered to your home within 2 working days

Read Barclays's official account information of their 'Student Additions Account'


  • £1,000 interest free overdraft upon opening the account
  • Maximum £3,000 interest free overdraft
  • Visa debit card
  • New banking app for iPhone and Android users
  • Free SMS text alerts
  • One further year of interest free overdraft after graduation
  • 25% off AA membership for a year

Read more detail about the 'HBOS' student account


  • £500 interest free overdraft upon opening the account
  • Maximum £3,000 interest free overdraft, but rarely used - HSBC operates a tighter overdraft service than any other large bank; their policy is to lend around the minimum guaranteed (£500-750). This means it has the lowest overdraft arrangement of any student bank account.
  • High in-credit interest rate of 2% on first £1000
  • Visa debit card
  • Free music downloads. Three album downloads from Sony Music available when you open the account, then three more each January and July until January 2016
  • Online budget calculator
  • Free SMS text alerts
  • No overdraft fees
  • £60 Amazon gift voucher
  • Interest free overdraft carried on 2 years after graduation
  • PayM service available: This allows you to pay friends and family with just their mobile number

Click here for more details on HSBC's student bank account


  • Interest-free overdraft of £500 upon the account opening
  • Maximum £1,500 interest-free overdraft through years one to three
  • Maximum £2,000 interest-free overdraft from years four to six
  • Free three-year NUS extra card
  • Visa debit card
  • Internet banking, PhoneBank and mobile banking

Read more detail about Lloyds' student account


  • Up to £500 interest free overdraft in year one increasing to £2,000 by year five (subject to you depositing at least £750 every six months and making at least three debit transactions every month)
  • Visa debit card
  • Mobile phone top-ups at cash machines
  • Emergency cash up to £300 if your card is lost or stolen
  • Free four-year 16-25 Railcard (if you held an account with them before 1st June 2011)
  • Certain benefits available for three years after graduation
  • Free tastecard membership (offering 50% off meals out)

Read more info about the Natwest student account here


  • Interest free overdraft subject to you depositing at least £750 every six months and making at least three debit transactions every month
  • Rising from £500 to £1,000 in year one: £500 in the first term, increasing to £750 in the second term, and £1,000 in the third term
  • Maximum of £1,250 in year two, and up to £1,500 in third year
  • Maximum of £1,750 in year four, rising to £2,000 by year five
  • Visa debit card
  • Benefits available for three years after graduation
  • Emergency cash up to £300 if your card is lost or stolen
  • Free tastecard membership (but only if you use digital banking and go paperless)

Read more detail about the RBS student account


Santander is offering a lucrative 16-25 railcard for this year's freshers
  • Free four-year 16-25 Railcard when you open a new account (provided you pay in £500 a term)
  • £1,500 interest-free overdraft, increasing to a maximum of £2,000 in year five (provided you deposit £500 into your account each term)
  • Only interest free overdraft if arranged. If not already arranged then a £5 fee will apply daily!
  • Visa debit card.
  • Continuing interest-free overdraft after graduation with a 'Graduate Account'.
  • 3% interest paid to you on balances from £300 up to a maximum of £2,000.

Click here to go to the Santander student account website page

The Co-operative Bank

  • Visa debit card
  • Guaranteed £1,400 interest free overdraft in year one increasing to £2,000 in year three.
  • Unlike other banks, majority of students get full £2,000 overdraft in third year
  • Bank has an ethical policy determining where it invests your money.
  • Smile, a (student account) linked to the Co-op, no longer offers student accounts to new applicants. It redirects new customers to the Co-op account.

Click here to find out more about he Co-op student account


  • Overdraft structure exactly the same as Lloyds, with a maximum of £1,500 starting at £500
  • Free three-year NUS extra card
  • £75 off a holiday booking with STA Travel
  • Internet and mobile banking
  • £10 overdraft buffer

Read more detail about TSB's student account

Yorkshire Bank

  • Maestro debit card
  • Only advisable if you live in Yorkshire or the surrounding area. Lack of branches and ATMs in major cities in the south of England.
  • Yorkshire is the only student bank account which is not interest free.
  • Up to £1,000 overdraft in year one increasing to a maxmimum of £3,000 in subsequent years

Click here to sign up for Yorkshire Bank Student Account

If you get into trouble

Whichever bank you choose, bear in mind that you may need their support if you encounter a financial problem in the future. They will be more willing to assist you if you can demonstrate that you have a responsible attitude to borrowing and have not abused your account in the past. If you are ever in financial difficulty it is a good idea to contact the bank and discuss it with them. They'd rather have a responsive customer than someone slipping further into debt.
  • Let your bank know as soon as possible. They may be able to help.
  • If you are in severe financial difficulty you can apply for Access Funds and hardship loans. Check with your college for more details.
  • You can get free confidential professional money advice from the National Debtline on 0808 808 4000 or from the Consumer Credit Counselling Service on 0800 138 1111.

See Also

Student Budgeting

Student Finance Tips

TSR Freshers Pack

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