How to choose the best student bank account

• Alex Hartley
• 10th September, 2016
• Money & Finance

As a student, financially you may have both the best of times and the worst of times. On the one hand, you don’t exactly have much of an income to play with. On the other, this is a great time for getting preferable rates, freebies and added extras. Many banks (and other financial institutions) will offer you good options now to secure you as a customer for the years ahead. Which is why it’s important to shop around when you’re looking for student bank accounts – or credit cards or personal loans.

Why bother with student bank accounts?

Student accounts have been created with the pressures and uncertainties of student life in mind. They tend to be more accommodating of cash flow issues and the need to delay repayments. Student bank accounts will also make it easier to transition into working life after university. They are the easiest option for those who are studying and don’t want to spend time worrying about finances. Student accounts also offer a good way to start building up some banking history. When you leave university you can do so with 3-5 years of positive banking history accrued.

Are all students eligible?

The rules on who can have a student bank account tend to differ from bank to bank. However, if you’re a full time student and you’re studying for a degree, a degree-equivalent or a postgraduate course then you should have no trouble opening an account. Some banks will also accept students who are studying for a non-degree course or another higher education program. If you’re a part time student then you may not qualify for a student bank account. The reasoning behind this is that part time students can work to support their study so there is no need for the full student treatment.

Using the account

Most banks don’t expect student bank accounts to be brimming over with cash and savings. Typically, a student bank account should be able to offer – at the very least – an interest free overdraft. Overdrafts are essential for students and will be key to using your account. Choose an overdraft that has the best conditions, as opposed to simply the most sizeable overdraft. You can get up to £3,000 as a student overdraft and this should be interest free. However, pay close attention to when this overdraft needs to be paid back. This is usually a date 12 months after graduation but you may find one that is longer. Choose a timescale that gives you sufficient time to make the repayment. Once the interest free period ends the overdraft charges shoot up and this can make a smaller student overdraft with a longer repayment period a better choice in the long run. It’s also worth looking into whether an account comes with a credit card. You may be able to get the same favourable terms on interest if you open the two at the same time.

What kind of freebies are available?

Remember that the freebies that come with a student bank account aren’t always as exciting as they first seem. Choose freebies that offer you genuine value – for example, a one year student railcard for free will give you a third off all rail fares. If your student account comes with free travel insurance then that’s another saving you can make if you’re planning to spend your summer with a rucksack on your back. Cashback is always welcome, although make sure the amount justifies choosing one bank over another. Cinema vouchers, music vouchers, tech equipment or discount cards for restaurants are all great but shouldn’t be the basis of your decision as they are too short-lived.

Have you read the small print?

Make sure you’ve established whether the overdraft is ‘guaranteed’ or ‘up to.’ If it’s not guaranteed then whether you’re eligible for it will depend on your credit rating. Find out whether freebies and offers are ‘subject to availability.’ If they are and they run out before it’s your turn to get one then you simply won’t get one. Choose a bank that also has a favourable graduate account so that you can transition from student to graduate financing without any fuss. Take a look at your credit rating. Although this isn’t crucial now, as you’re not likely to have yet ventured far into the world of credit, it is important. Credit cards, payday loans, personal loans and overdrafts can all have an impact on whether you will be a good lending prospect when you graduate. Keeping an eye on your credit rating will ensure you stay in the banks’ good books.

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