What are student bank accounts?
Heading off to university? Thinking about opening a student bank account? Look no further as we break down what exactly they are, how to choose the best one and where to go for the best deal.
Student accounts are basically bank accounts made for people who are in or going into higher education. They work like any other bank in that they allow you to pay money in and take it out as usual, but where they differ is that they offer extra benefits such as an interest-free overdraft.
With all the expenditures going on at university, from having nights out, to weekly food shops, and buying textbooks amongst other things, students will spend quite a bit of cash. This means most students will need an overdraft, which is where the bank allows you to spend more than you’ve got in your account at no extra cost, that’s nice of them.
You should try to get the biggest and lengthiest 0% overdraft you can, where this wouldn’t apply would be if the incentive on offer from a different bank is too good to turn down.
What you need to know before choosing a student bank account
Banks are constantly targeting students as you are basically investing in yourselves to earn the big bucks after graduating. While at first it may seem like you’re just borrowing money to fund your education, but banks will be thinking long-term and hoping you stash your high earnings away with their establishment. Remember, you don’t always have to be loyal to your bank, if another bank is offering a better deal it may be worth changing as it could benefit you in many ways.
Many banks will offer incentives in order to lure you over to their bank, such short-term rewards can include; exclusive deals, insurance, free products or cashback rewards. The key word is “short-term”, try not to be pulled in for the promise of a £20 gift voucher for amazon when another bank is offering a large interest-free overdraft for 3 or more years, be realistic with your decision.
A way of borrowing money through your current account that is commonly used is through an arranged overdraft. One of the biggest benefits of a student account is that money you borrow through an overdraft has 0% interest, this means the money you pay back doesn’t exceed the amount you borrowed.
This is something other types of bank accounts don’t do so it makes sense to take full advantage of it. A key thing to look out for is whether the banks offer an “up to” or “guaranteed” amount, with the former meaning you’ll only receive the amount promised if you have a good credit record.
What is the best bank account for you?
With all the banks offering different things in an attempt to get your business, there are a couple that stand out and they’re listed below.
They offer large 0% overdraft limits of £1,000 in the first year, up to £2,000 in the second and up to £3,000 in the third. However, its only “guaranteed” if you keep to the account conditions and have no credit issues.
With this bank you get “up to” £1,500 0% overdraft for three years, which increases in future years if you do a longer course. You also get a nice freebie in the form of a four-year 16-25 railcard for full-time students opening a new account, but you do have to pay in £500 per term to get it. The overdraft is smaller than Nationwide so it all depends on whether that freebie is worth it.
As well as getting a guaranteed 0% overdraft figure of between £500 and £1000 when you first open an account, you also get a nice little freebie in the form of an Amazon voucher worth £60 and a year’s worth of Amazon Prime when you open an account before October 31st, 2017. Although you get that amount of overdraft at first, you’ll need to apply for a larger sum after the first year if you need one further down the line.