By Laura Rettie, Personal Finance Journalist. Last updated 8th November 2023.
If you’re off to university in September, you need to be on the lookout for a student bank account. Current account providers often offer competitive deals for students, but the best account for you will depend on your circumstances.
Student bank accounts are specially designed with students in mind. They typically come with interest-free overdrafts and even the occasional freebie.
Banks want students as customers for two main reasons. Firstly, if a bank can attract a student, they’re likely to earn money from them if they choose to take out a loan or mortgage with them in the future. Many students will keep the same current account open for a long time, providing the bank with many opportunities to convert them into borrowers, providing the bank with income.
Secondly, after graduation, a student account will transition into a graduate account and eventually into a standard current account. At this point, the bank will start charging interest on any remaining overdraft balance. Banks count on the fact that many students can only repay their overdraft after interest kicks in, allowing them to make money from students who cannot afford to clear their overdraft.
You can open most student accounts from the age of 17, although you won’t be able to apply for an overdraft until you turn 18.
With some student accounts, you need to be a first-year student to apply.
Other providers of student current accounts state that you can’t have another student account open simultaneously.
To apply for a student account, you’ll typically need the following:
Proof of address (such as a passport, birth certificate or driving license)
Proof of acceptance at your place of study (either your unconditional offer letter, a letter from the university confirming your place, or your A-level results that meet your conditional offer. This can sometimes also include apprenticeship agreements)
Several student accounts require you to live in the UK for at least three years. There are other accounts designed for international students.
Choosing your student bank account is an important one; it’s one of the first big financial decisions you’ll make, and for many, it’s deciding who they bank with for most of their adult life.
Here are a few things to consider when looking for a student bank account:
For many, a student overdraft is their first time borrowing money. Most student bank accounts come with interest-free overdrafts for at least three years. But is a student overdraft a good idea?
The amount of interest-free overdraft can be one deciding factor for many new students when choosing a current account. Many students live in their overdraft, so it’s essential to learn how to use it sensibly, sticking to your credit limit and only borrowing what you can afford to pay back.
Borrowing money for free will not be easy to do once you graduate, so it’s important to value the opportunity and make the most of it. Misusing an overdraft by going over your limit or failing to repay it will cost you dearly in the future.
Overdrafts are one of the most expensive ways to borrow over a long period and should only be used in emergencies once the interest-free rate has ended.
Having a student overdraft is only something you should sign up for if you can manage it responsibly. Using an overdraft sensibly can help you build your credit score, giving you access to better deals on loans, overdrafts and mortgages in the future. But on the other hand, misusing your overdraft could damage your credit history, making it more difficult or expensive for you to borrow in the future.
Consider whether you’re likely to use an overdraft sensibly before getting one.
Numerous banks provide incentives when opening a student account, so comparing the available options is beneficial to find the best deals.
If you're torn between two accounts that meet your requirements, the incentives provided may be the deciding factor. Banks offer cash incentives, railcards, discounts, and cashback rewards. Decide what’s most important to you and what will save you the most money.
It used to be common for banks to pay interest on the balance of student accounts. However, this has become less common in recent years. There are still a couple of banks offering interest on student accounts. However, you may be better off getting a savings account if earning interest on your money is important to you.
Before choosing any financial product, it’s a good idea to read online customer reviews before deciding on a student bank account.
This way, you can find out how good their customer service is, how easy it is to use their app, what their customers say about them and highlight any common issues.
It’s a good idea to steer clear of a bank with many one-star reviews because that’s a red flag.
No - if you’re not planning to use an overdraft, you may use a standard current account. App-based banks such as Monzo or Starling can be extremely helpful with budgeting and help you learn how to manage your finances.
If you opt for a student bank account, once you’ve graduated it’s important to consider your options. You may find a different bank account that suits you better as your needs evolve, so use comparison sites to find the account that’s right for you.
The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.