How to choose a student bank account

• What is a student bank account?
• What are the benefits of a student bank account?
• How do I find the best student account?
• When should I apply for a student bank account?
• How do I switch to a student bank account?

What is a student bank account?

Student accounts are bank accounts designed for individuals in higher education. Student bank accounts have features different from most regular bank accounts and may offer additional benefits such as an interest-free overdraft. Apart from an overdraft, you may be offered a credit card. It can be easy to take these features for granted and get into debt.

According to a survey conducted by MustCompare in 2023, one in five UK adults go into overdraft every month. According to The Money Charity, credit card debt averaged £1,308 per adult until April 2024.

There are risks to being overly reliant on your overdraft and credit card - even if you’re not charged interest for certain credit products while studying. Debt can spiral out of control with little chance of paying back what is owed.

As with any form of borrowing, never borrow more than you need and make sure you can afford the repayments. Getting yourself into serious debt can impact your life for years. It may be a good idea to get in the habit of creating and sticking to a budget. There are simple ways to make budgeting fun, for example, rewarding yourself for sticking to a budget and getting family and friends involved.

What are the benefits of a student bank account?

Student accounts differ from bank accounts for 16-year-olds and bank accounts for children as they do not offer credit products. One of the benefits of student accounts, however, as mentioned above, is zero-interest overdraft. Apart from zero interest overdraft, here are a few student bank account perks we picked up:

• Santander Edge Student Current Account Perk(s): 4 year Railcard
• NatWest Student Account Perk(s): 4 year Tastecard
• Lloyds Bank Student Current Account Perk(s): Cashback at certain retailers
• Bank on Scotland Student Current Account Perk(s): Cashback at certain retailers
• Halifax Student Current Account Perk(s): Cashback at certain retailers
• Barclays Student Additions Account Perk(s): A 12-month subscription to Perlego

Not every bank account will work for you, so decide what features your bank needs and understand which are important. For example, freebies like travel discounts, cashback and other "exclusive" deals may sound tempting, but all these combined may not be as handy as a large three-year interest-free overdraft.

You should also consider if there are costs associated with the bank account you choose. For example, receiving and sending money overseas, foreign exchange rates and overseas usage may also result in substantial charges. 

How do I find the best student account?

Choosing the best student account for your circumstances can take time and may not be straightforward. Here are a few helpful points that may help you:

1. Check if the account comes with an interest-free overdraft.
   Although you will have to pay back what you borrow and should not rely on credit to get by, an overdraft can be a handy temporary fallback. You’ll want to look at the amount you can borrow and how long the interest-free period will last.
   
   
2. Check if you’ll need the perks.
   Add-ons, freebies and perks can save you money, but make sure they will be useful; otherwise, there is no point. And avoid going for a student account based solely on the freebies.
   
   
3. Check for any costs that come with using the account.
   Banks will charge for certain transactions and features. For example, with the Santander Edge Student Current Account, you’ll be charged £25 for non-Euro international payments. There is a £5 charge for receiving a payment in a foreign currency with the HSBC Student Bank Account.

Having an overdraft or credit card will impact your credit score and history. So you’ll want to check your credit report regularly, avoid late payments, get on the electoral roll and continually try to improve your credit score. Interestingly, a student loan will not impact your credit score. But, if you were to get a personal loan, it would show on your credit report.

When should I apply for a student bank account?

You can apply for your student account when you receive your offer letter from UCAS (University and Colleges Admissions Service). It is a good idea to make an appointment with your bank. You can make an appointment by calling the bank or asking the branch.

You should know what documents or identification you must bring to your appointment. If unsure what to take, visit your bank’s website or contact them before your appointment. As these are student accounts, you must be 18 years old and normally a full-time student. You’ll likely need the following (although requirements may differ depending on the bank):

• Your UCAS code or confirmation letter (or a UK university or college confirmation letter)
• Your passport
• Your student visa (if applicable)
• Proof of address

How do I switch to a student bank account?

At the age of 16, you can open your own bank account without a parent or guardian. Some of the best bank accounts for 16-year-olds offer competitive interest rates on savings. Once you’re 18 and accepted as a student, you can change your current account into a student account by contacting your bank. You will still need your UCAS letter (or a valid UK university or college confirmation letter) and identification to request a student account.

If you are moving banks to get your student bank account, you will likely need to make an appointment with the new bank to apply for your student account and take the required documents. If you are moving from overseas to the UK to study, you must apply for an International Student Account.

If you decide not to get a student bank account, make sure what you get is covered by the Financial Services Compensation Scheme (FSCS) - which can compensate you if your bank goes bust. Alternatives to bank accounts, such as prepaid card accounts, are not covered by the FSCS and will not have the added perks such as a zero-interest overdraft.

Final thoughts

Choosing a student bank account is essential for managing your finances effectively while studying. Student bank accounts offer unique benefits such as interest-free overdrafts and various perks. However, selecting an account based on your needs is more important than choosing one just for the perks alone. Consider the interest-free overdraft limit, the relevance of offered perks, and the potential costs associated with the account, especially for international transactions.

Applying for a student account requires a UCAS confirmation letter, proof of identification, and proof of address. Switching to a student account or applying for an International Student Account involves similar documentation and may require an appointment with your bank. By carefully evaluating your options, you can find the best student account to support your financial needs during your studies.

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