Student bank accounts are specifically designed for full-time students in further education over the age of 18. Some banks do offer such accounts to students aged 17, but you wouldn’t be offered an overdraft or credit card. You must also be a UK resident (most banks offer alternative accounts for international students) and your course must either be at least two years in duration, or one year if it leads to a degree.
Competition in the UK student bank account market is intense, with all major banks vying for new customers, in the hope that you will remain loyal after you’ve graduated. As such, student bank accounts are free to use and offer a wealth of goodies, freebies and discounts. Most offer one or more of the following benefits:
Cashback. Earn cash with your everyday spend. The level of cashback earned and the retailers where cashback can be redeemed differs from bank to bank, so check that you would (or could) normally shop there, and that you can get your student discount too.
Interest free and fee free overdraft. Most UK student accounts offer a fee-free, interest free overdraft of some description, but they are not all the same. Typically, student overdrafts are tiered, offering an increasing amount the further you go into your studies, and the amounts vary from account to account. Further to that, the wording on any overdraft promises should be considered carefully, with some stating ‘guaranteed’, whilst others promising ‘up to’ amounts. The ‘up to’ will be dictated by the result of a credit check and checks on your financial behaviour with your student account, and will be assessed on a case-by-case basis. It may be that you are not offered the full amount, or are turned down altogether, so this is worth bearing in mind if the overdraft is of paramount importance to you. It is also worth noting that in many cases you will have to actively apply for an overdraft increase every year, rather than it being automatically granted to you. However, it is simple to do, and often can be completed via the bank’s mobile app.
Interest on in-credit balances. The interest rates offered differ from account to account, and so does the balance limit up to which they will pay that interest, so it is always worth shopping around if you think you will have an in-credit balance during your studies.
Free railcard. This is generally a free four-year railcard (worth about £120), which saves you 30% on rail and underground tube travel.
Access to discounted products or freebies. These include things like preferential rates on food, days out or activities, gadget and travel insurance, or tickets and competitions.
You can apply for a student account by filling out a simple online form or by visiting a bank branch. Many of the major banks offer the seven-day switch guarantee where you can move all your financial particulars from your main account to your student account seamlessly within seven working days. You will need to produce some form of ID to prove your identity and your address, and some form of documentation proving that you’re a student (or are guaranteed a place at a university/college). Such forms of ID can include:
Proof of identity such as passport or driving licence.
Proof of address such as a bank or building society letter, or a letter from the university. Alternatively it can be any official document that is less than three months old with your name and address on it.
Proof of being a student – your UCAS confirmation of place letter, or a letter from the university/college confirming your place.
It should be noted that only original documentation can be accepted, so if you’re applying online you will have to visit a branch to submit your documentation. Generally you do not need to make an appointment to do this.
Once you have proven you’re eligible for a student account, the bank will undertake a credit check using your details. Unless you’re a mature student, it’s likely that you won’t have much of a credit history – but if you have missed payments you were responsible for paying and your credit rating has suffered because of it, you may be refused a student bank account at this point. It is always better to check out your credit history using one of the credit reference agencies (Experian, Equifax or CallCredit) prior to applying for a student account, just so that you are aware of what the banks will see.
In order to keep your account open, and gain all the rewards it offers, many banks stipulate a minimum deposit amount per term (usually around £500) that must be paid into your account.
This differs from bank to bank. Some accounts will give you one year to repay what’s left of your overdraft; others will give you two or even three years. Some banks will offer a reducing tiered arrangement where the amount of your overdraft will be reduced each year, encouraging you to pay it off over time. It is important to consider how you will repay your overdraft well before you leave education, as it could be a costly form of borrowing if you are left to repay it at double digit interest rates.
With all the tempting goodies on offer, it is easy to be swayed towards one account over another, but it is important to think about how you will really spend your time (and money) as a student – so you can work out which benefits and rewards you will actually make use of. For example, there’s little point in applying for an account that offers an impressive interest rate on savings if you are unlikely to ever have any, or an account with a free railcard if you are rarely going to travel by train.
It is likely that as a student living on a student loan you will need an overdraft, so it makes sense to check out the overdraft rates on offer (and whether these are ‘guaranteed’ or ‘up to’). Once you have narrowed down a few accounts, check out the freebies, cashback deals and discounts on offer. Make sure that you will actually shop at the places with the discounts or cashback, so that you can fully maximise your gain and get the most out of your student account.