• Student bank accounts

TSR Wiki > University > Student Life > Finance and Money Management > Student Bank Accounts

Student bank accounts are essential for your time at university. 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!


Choosing an account

Several websites provide useful information and guidance to help you with choosing a student bank account:

  • MoneySavingExpert publishes a wealth of information on the student accounts offered by most major banks and which ones are the best. Here you can compare the benefits of various accounts.
  • Save the Student! provides sage advice on choosing a student bank account, including a regularly updated comparison table.
  • Savings.co.uk has information on what to look out for when taking out a student bank account including interest-free overdrafts, earning interest on your money and student credit cards.

Opening 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

  • 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.

Credit 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!


So you now have a small idea of the student banking system. Let’s have a look at the big players in this market:


Barclays Student Account

  • £200 interest free overdraft upon opening the account
  • Up to £2,000 interest free overdraft, extendable up to £3,000 at an 8.9% annual interest rate (variable)
  • Visa debit card
  • Free SMS text alerts
  • Continuing interest free overdraft after graduation

Halifax (HBOS)

HBOS Student Account

  • £1,000 interest free overdraft upon opening the account
  • Up to £3,000 interest free overdraft for up to 5 years while you are a student (from experience you are VERY unlikely to receive the full £3,000 limit)
  • Visa debit card
  • Free SMS text alerts
  • One further year of interest free overdraft after graduation
  • 25% off AA membership for a year


HSBC Student Account

  • £500 interest free overdraft upon opening the account
  • Up to £3,000 interest free overdraft (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)
  • 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
  • Free SMS text alerts
  • No overdraft fees
  • Online budget calculator

Lloyds TSB

Lloyds TSB Student Account

  • Up to £1,500 interest free overdraft through years one to three, and £2,000 from years four to six
  • Visa debit card
  • Internet banking, PhoneBank and mobile banking
  • Free three-year NUS extra card
  • £75 off holiday booking with STA Travel
  • £10 overdraft buffer


Natwest Student Account

  • Up to £1,000 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
  • Benefits available for three years after graduation
  • 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)
  • Free tastecard membership


RBS Student Account

  • Up to £1,000 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
  • Benefits available for three years after graduation
  • Emergency cash up to £300 if your card is lost or stolen
  • Free tastecard membership


Santander Student Account

  • Automatic £250 overdraft, then up to £1,500 interest-free overdraft, increasing to a maximum of £2,000 in year five (provided you deposit £500 into your account each term)
  • Visa debit card
  • Continuing interest-free overdraft after graduation
  • 1% interest paid to you on the first £500 of your bank balance
  • Free four-year 16-25 Railcard when you open a new account (provided you pay in £500 a term)

Santander 123 Account

  • Current account (not student account)
  • 3% interest rate on up to £20,000
  • Cashback of 1-3% on household bills
  • Require two direct debits and costs £2 per month but can give a lot more in interest
  • Gives access to better savings accounts such as exclusive, high interest, tax-free ISAs


Smile Student Account

Smile no longer offers student accounts to new applicants. It redirects new customers to the Co-operative Bank student account

The Co-operative Bank

The Co-operative Bank Student Account

  • Guaranteed £1,400 interest free overdraft in year one increasing to £2,000 in year three
  • Visa debit card
  • Bank has an ethical policy determining where it invests your money

Yorkshire Bank

Yorkshire Bank Student Account

  • Up to £1,000 overdraft in year one increasing to £3,000 in subsequent years (NOT interest free)
  • Maestro debit card

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.

Useful External Links

Comparisons of Student Accounts

General Advice

British Bankers' Association: Advice on Student Accounts
BBC Working Lunch Summary
Guidance on choosing a bank from thesite.org

See Also

Try Learn together, TSR's study area



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