Student bank accounts

Student bank accounts are specifically designed for full-time students in further education over the age of 18. 

This guide explains exactly how they work, what the benefits are and how to go about applying for one.

What is a student bank account?

A student bank account is a type of current account for those in higher education. Money can be paid in and withdrawn from the account, and many student bank accounts come with a host of benefits such as an interest-free overdraft.

You’ll usually need to be aged 18 or over to open a student bank account. Some banks will offer student accounts to those aged 17, but you won’t be offered a credit facility such as 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 2 years in duration, or 1 year if it leads to a degree upon completion.

How do I compare student bank accounts?

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. However, when looking for the best student bank account, it’s important not to be too swayed by the freebies and make sure you look at what else the account offers before making your decision. 

Most student accounts will offer an interest-free and fee-free overdraft which is important as the majority of students will need to borrow money to cover costs while they are studying. Typically, student overdrafts are tiered, offering an increasing amount the further you go into your studies, and the amounts vary from account to account. 

It’s important to compare overdraft options carefully, including the wording on any overdraft promises – some are ‘guaranteed’, whilst others promise ‘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 overdraft 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, even on guaranteed limits, 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.

Comparing student bank account offers 

Other benefits you may come across when comparing student bank accounts include:

  • 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 on in-credit balances: how much interest you earn and the balance limit up to which interest will be paid varies depending on the account. It is always worth shopping around if you think you will have an in-credit balance during your studies

  • Free student railcard: some accounts offer a free 4-year student railcard (worth about £120), which saves you 30% on rail and underground tube travel

  • Access to discounted products or freebies: this could include a 4-year National Express Coachcard, a year’s Amazon Prime student membership, preferential rates on food, days out or activities, gadget and travel insurance

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.

How do I open a student bank account?

To open a student bank account, 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 3 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

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.

Can I open a student bank account online?

Yes, you can apply for a student account by filling out a simple form online. However, note that usually only original ID documentation can be accepted, so you will have to visit a branch to submit your documentation. Generally you do not need to make an appointment to do this.

Alternatively, the whole account opening process can be completed at your local 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 7 working days.

Can I get a student bank account with bad credit?

If 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 TransUnionCallCredit) prior to applying for a student account, just so that you are aware of what the banks will see.

What happens to my student account when I graduate?

What happens to your student account when you graduate differs from bank to bank, but it will usually be converted to a graduate account.

Some accounts will give you 1 year to repay what’s left of your overdraft; others will give you 2 or even 3 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.

1 December 2020