Studentbeans.com easy guide
Uni debt - as scary as it sounds - is manageable, so long as you make use of the cheap borrowing opportunities available to you. Switch to a student account now and get 0% interest on your overdraft.
What's in this guide
- Student accounts and student debts
- Why a student bank account?
- Setting up a student bank account
- Student account: Overdrafts
- Student accounts compared
Last updated September 05 2011
Student accounts and student debts
Graduating uni with over £23,000 in debt sounds like a pretty scary prospect. But that’s the figure charity Credit Action recently came up with when researching current student finances and unfortunately, it looks as though the debt incurred by students in the UK will only increase in line with the planned rise in tuition fees. Thankfully, student bank accounts take this factor into account, allowing you to manage your student debts much more easily.
Why a student bank account?
The best place to start is with a student bank account. Banks tend to offer such great rates to uni students because they know exactly how lazy we all are and that when we graduate, the likelihood of us switching from the provider of our student account is very low. So banks tend to compete for student custom, with great student account offers, before charging more for the privilege of banking with them once student life is over. It’s a sneaky set-up but it really works. And yes, we’re speaking from experience. Hangs loyal customer head in shame.
Setting up a student bank account
Before enrolling, prospective students should set up a student bank account. This is basically a regular current account but with bonus add-ons, all of which work to make life as a cash-strapped student that little bit easier.
What you’ll need
UCAS offer letter - You'll need a UCAS offer letter or uni place confirmation letter to set up a student account. As soon as you get that through the post (and have finished your celebratory boozing session) then apply for one so that you can start benefiting right away.
ID - Take along a passport, driving licence (photo-card or paper) or birth certificate to prove your identity.
Remember a proof of address too - A provisional or full driving licence photo-card will do, as will a statement or letter from the bank, a TV licence, a UCAS letter or a utility bill.
Student account: Overdrafts
0% interest: no charge on borrowing - one of the very best things about student accounts is that they often have decent overdraft facilities, with most offering 0% interest. A 0% interest overdraft can be the most useful thing for a student because it’s basically an interest free loan, providing you stay within the limits of your overdraft set by your bank.
Usually customers are charged for this so it’s definitely one of the most important things about getting a student account.
Overdraft limit comparison - Halifax and HSBC offer two of the most enticing student bank accounts, with their mammoth £3,000 interest-free overdrafts, available as soon as you start uni. Barclays and Smile are second-in-line with a £2,000 limit for the first year; Lloyds TSB offer £1,500 and The Co-operative offer just £100 less, while NatWest, RBS and Santander have overdraft limits all at the £1,000 mark.
Cost of going over your overdraft - Should you go over your agreed overdraft limit, you will be charged, with the price being dependent on by how much you go over and for how long you spend over the limit. Click here for a run-down of the charges you should expect.
Get an overdraft, even if you don’t need it
Make money on your interest free overdraft - For the lucky (and financially disciplined) ones that don't see themselves sitting in the red throughout their time at uni, it might be wise to opt for the biggest overdraft facility anyway. That way, you can gain money by taking existing funds out of your account and placing them in an ISA, which will earn you tax-free interest. Feels a bit wrong? Just wait until that extra cash is in your pocket at the end of term.
Student account: Freebies - As tempting as it might be, do not choose the bank you go with based simply on what snazzy things they are giving away. Remember, banks know that they normally have a customer for life once they sign a student up, so a free lump sum or a crappy MP3 player can be cheap bait to entice new meat. In reality, these offering are less likely to benefit you in the long term so just ensure that you always think of the overdraft first and maybe consider the free gifts when more than one student account is looking like an attractive option.
Student account: Accessibility - The likelihood is that you’ll have a bank branch near to you at uni - if not on campus - but it might be worth checking in advance so that you don’t have to trek into town every time you need to manage your finances.
Having said that, many banks offer online facilities, making it much easier for customers to manage their finances. Whether you’re at home, in uni or sat on the sofa catching up on Hollyoaks, the likelihood is, you’ll be able to access your account.
Paying back your overdraft: student accounts after being a student
Having a 0% overdraft is fun while it lasts but the sad fact is that you will start having to pay for sitting in the red. Having said that, banks won’t charge you for your overdrafts as soon as you graduate. Many offer graduate bank accounts or simply extend the terms of their student account.
For example, Halifax automatically continue to offer their £3,000 interest-free overdraft for one year following graduation, while HSBC offer an interest-free overdraft for up to two years following graduation, set at different limits.
Student accounts compared
Choosing the right student account can be a confusing process so we’ve broken down some of the key aspects attributed to each high street student bank account in the aim to make starting your uni life that little bit easier. Happy spending!
Compare student accounts
|Barclays||Interest-free up to £2,000||N/A|
|The Co-operative Bank||Interest-free up to £2,000||N/A|
|Halifax||Interest-free up to £3,000||Commission-free foreign currency and traveller's cheques / 25% discount on AA breakdown cover / 20% discount on our Card Care card protection insurance|
|HSBC||Interest-free up to £3,000||Free TalkMobile SIM card with £5 preloaded credit / Two years free Worldwide Travel Insurance|
|Lloyds||Interest-free up to £2,000||Free YHA membership for three years / 40 free music downloads / Free LAVA mini-speaker (subject to availability)|
|Natwest||Interest-free up to £1,750||Top up Pay As You Go mobiles at Natwest cash points / Get emergency cash (up to £300) via a unique pin if your card has been lost or stolen|
|RBS||Interest-free up to £1,750||Top up Pay As You Go mobiles at Natwest cash points / Get emergency cash (up to £300) via a unique pin if your card has been lost or stolen|
|Santander||Interest-free up to £2,000||Mobile insurance / Gadget insurance / Laptop insurance|
|Smile||Interest-free up to £2,000.||N/A|