Choosing a Student Bank Account
This page is kindly provided by our friends at Save the Student.
Choosing the right student bank account
The new academic year is fast approaching and along with the excitement and build up towards freshers’ week comes one of the biggest financial decisions you will have to make as a student: choosing a student bank account.
Not only is a student account a useful place to keep your money (as opposed to behind the sofa) but there are also plenty of useful bonuses on offer to students such as the coveted interest-free student overdraft.
We asked student finance guru Jake Butler from Save the Student what his top tips were when choosing a student account.
Don’t be loyal!
A high number of students will already have an account with a particular bank before heading off to university but this doesn’t mean that you have to stick with them.
Much like comparing the latest broadband deal or choosing which shop to buy a new pair of shoes at, you have the freedom of choice. Use it!
The truth is that the banks want you more than you want them, which is the perfect situation as it allows you to shop around, compare and then make a decision.
Check the overdraft amount
It’s a well known fact that the standard maintenance loan is not enough to cover the living costs of being a student which means that you’ll have to look for alternative sources of money including grants, parental help and other forms of finance.
One of most cost effective ways to borrow money as a student is undoubtedly the student bank account overdraft as it allows you to borrow money, sometimes up to £3,000, at 0% interest with the view that you’ll pay it back once you graduate.
So my advice is to go for the account that’s offering the largest overdraft this year.
Check the overdraft terms
In an ideal world all of the banks would have similar terms and conditions surrounding their overdrafts but unfortunately this isn’t the case.
When looking at the accounts you might notice that some boast an overdraft of “up-to” a certain value whereas others prefer to “guarantee” an amount.
Some banks (usually the ones with the largest overdrafts) like to use a sneaky little trick of offering students up to £X. This is because you won’t be guaranteed to get the full amount depending on your credit history and other factors.
Some student accounts also have a tiered overdraft where they offer so much in the first term and then increase the amount at times throughout the year. An important factor if you are relying on the overdraft to pay for an accommodation deposit or course materials for example.
Luckily you can check the terms for each bank in more detail here.
Mini disclaimer: Do be aware that the overdraft is not free money (as much as it may seem so) and you will have to pay it back at some point. It’s best to use it as a safety net rather than an excuse to go on a shopping binge.
Check for freebies
In recent years the banks have been a bit tight in terms of offering freebies to students. This could possibly be down to the fact that a number of student finance commentators have warned students of not getting sucked in by them.
It’s best to judge the freebies on a case by case basis. A free railcard for example could be well worth it but a free lollipop won’t.
It really depends on what you want! If you need an account with a decent overdraft but they don’t offer any freebies then you’ll probably still want to bank with them.
For example, if a freebie is only worth around £50 and you’ll have to sacrifice an extra £500 or so on your overdraft, well, then you do the maths.
A good freebie can be an added bonus but try not to let it totally sway your decision.
The location of your bank is becoming less and less important in these modern times with the introduction of mobile banking and flashy new apps.
However, if you are someone who loves to have a chinwag with your bank manager or needs to cash in cheques and money then you might want to consider which banks have a presence near your campus.
Beware of interest charges
If you are confident that you can manage your money then you shouldn’t need to worry about going over the overdraft limit but it’s still well worth checking what might happen if you do.
Once again the banks all have different T&Cs surrounding their charges so check them thoroughly before applying.
It’s YOUR choice
If everyone bought the same things and used the same services then life would be a little bit boring wouldn’t it? Plus, something that works for you might not be ideal for others.
So, with that in mind, make sure that you make the right choice for you. Combine all of the factors above and consider which account suits your needs.
If you plan to travel a lot then a free 16-25 railcard might suit or if you need a bigger overdraft then choose accordingly.
The power, as a consumer, is in your hands!
Last Updated: 22 July 2013